The new rules proposed by the City watchdog, the Financial Services Authority (FSA), are meant to ensure that anyone who is fined must pay the fine himself.

Since achieving super-regulatory status at the turn of 2001 the FSA has increasingly been flexing its muscles fining firms that mis-sell or issue misleading advertising.

"Insurance to pay FSA fines not only reduces the impact of those fines but also lessens the incentive for firms and individuals to meet appropriate standards," said the FSA's Carol Sergeant.