Legal & General, Aviva, Standard Life and Prudential were all down between 2.5 percent and 8 percent after UK finance minister George Osborne announced the plans as part of his annual budget.

"It's the annuity relaxation that is really hitting the insurers," said Dafydd Davies, senior trader at Prime Wealth Group.

(Reporting by Simon Jessop, additional reporting by Sudip Kar-Gupta; Editing by Alistair Smout)