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The message came from the regulator's managing director for wholesale markets, Sally Dewar, as she addressed the Association of British Insurers' Solvency II conference on 10 June.

She told the audience the bid to rationalise insurance markets within the European Union was the biggest collaboration the FSA has ever undertaken with similar bodies on the continent.

But she claimed feedback on the proposals from the industry has disproportionately represented the biggest firms and urged other companies not to ignore the reforms, which she argued were inevitable.

She said: "Solvency II is a big commitment for the FSA. The chance to break free from confines of an ancien regime that stands in the way of a modern market.

"Industry participation in Solvency II has been exemplary. I would note that there has been a distinct bias in those who have given their views towards the big players in the market.

"Solvency II is going to happen and the best way of dealing with it is not to bury your heads in the sand."

And in a further warning to under prepared companies, she said: "Icas and Solvency II have some similarities but they are not the same. We will have to be prepared."

At the event in Grosvenor Square's Marriott Hotel, Ms Dewar also praised the European Commission for their work on the programme and its proposals.

She said: "It is right to start by commending the commission. The results of their groundwork are reflected in the quality of its proposals."

In particular she highlighted plans to make senior management at insurers take greater personal responsibility for risk management and to introduce supervisory colleges, which she hoped would increase confidence in the industry.

And she promised the FSA would bring out a paper of recommendations later in the year, in order to start up further dialogue within the industry.