Standard Life, Europe's biggest mutual life assurer, has warned that it may be forced to impose exit policies for the first time.

Reports suggest that fears over falling stock markets could prompt a large number of policy holders to surrender their policies early.

The insurance group told the Financial Times newspaper that if this is the case, it would have to impose penalties.

Standard Life has, unlike a number of its peers, until now held out against exit charges.

Tipping the balance

Until the end of July, the Edinburgh-based said it had not experienced many early policy surrenders.

In April, the company reported record levels of new business, helped by a sharp lift in sales of pensions.

Chief executive Iain Lumsden told the FT that the group's financial position was still strong.

But he warned that reports on the financial health of the industry as a whole could be knocking confidence among policy holders.

"The more talk there is about our bonuses going down, the more likely it becomes that we are going to have to apply market value adjusters," said Mr Lumsden.

The group has also admitted that it may have to make further cuts to bonus pay-outs.

In February, Standard Life cut its bonus payments on life and pension products by 9.4%.