An underwriter who underwrites risks on a reasonable basis and who is neither unduly apprehensive nor duly incautious. The concept of the prudent underwriter is at the heart of the fundamental principle of utmost good faith as a fact will be judged to be material (see material fact) if it is one that would have influenced the judgement of a prudent and experienced underwriter in his assessment of the risk. The assertion that the particular underwriter would have been influenced by it does not make it a material fact and the fact that another would have ignored it does not prevent it from being material. The test is objective.

Deals with the financial management and viability of a firm. It is aimed at ensuring that company failures do not endanger the stability of the financial markets or cause financial loss for the customers of that firm. The FSA sets the standards for the maintenance of capital resources proportionate to a firm’s risks. The provisions will shortly be incorporated into a single Prudential Sourcebook.