The Financial Services Authority has given an in-principle approval for Prudential PLC to go ahead with its proposed takeover of American International Group's Asian life insurance unit AIA, the Financial Times reports.

Citing people close to the matter, the news service said that the UK regulator had dropped opposition to the proposal after Prudential agreed to change the terms of debt it will use to fund the £24 billion ($35.5 billion) deal. Prudential is also said to be creating a £1 billion contingency fund.

A few days ago, the FSA had been against the transaction, saying that Prudential should hold more capital for itself in the event of market shocks. The regulator had wanted to make sure the firm had adequate financial cushioning, otherwise, the deal would not win its go-ahead.

AIA has a huge network in Asia and has a presence in about 12 markets in the region.