The Financial Services Authority is concerned that rules requiring UK insurers to hold enough reserves to cover falls in stock markets could cause weaker companies to switch from equities to safe bonds or cash.

It could suspend part of the rules - known as the "resilience test" - as soon as today.

The move comes as insurers are facing increased scrutiny from regulators around the world. Watchdogs are trying to establish how badly the industry's reserves have been affected by falling share prices in the aftermath of the terrorist attacks in New York and Washington.

"We don't want to do anything that might lead to unnecessary technical selling of equities into a falling market," the FSA said yesterday. "That would not help anyone and certainly wouldn't be in the long-term interest of policyholders."

Insurers and reinsurers will be forced to sell some of their investments to cover claims estimated at $30bn (£20.4bn).

Rumours on Friday that sales had started rocked the markets, although Germany's biggest insurers and reinsurers, notably Allianz, Munich Re and Hanover Re, said they had not sold large amounts of their equity holdings.

In Germany, damage claims from the attacks could be as high as E2.1bn (£1.3bn) for Munich Re, E1bn for Allianz and E400m for Hanover Re, while in the US Warren Buffett's Berkshire Hathaway expects a bill of $2.2bn.

However, the FSA's main focus is on life assurers. The FSA's resilience test forces life assurers to stress-test their portfolios to ensure their reserves will be adequate even in worst-case scenarios.

But after big falls in shares, the regulator fears some companies may be on the verge of failing the test. This could force them to sell shares to invest in safer bonds, pushing down the stock market and starting a cycle of decline.

In the US, market watchdogs have been easing rules to help financial markets continue to operate properly.

Harvey Pitt, chairman of the Securities and Exchange Commission, said the US markets had operated well last week, but the SEC would "respond immediately and forcefully" if signs of dislocation occurred.