LONDON (Reuters) - British insurer RSA (>> RSA Insurance Group plc) has strengthened its capital base above its target range with a deal to dispose of a book of mainly asbestos-related insurance policies, the firm's chief financial officer said on Wednesday.

RSA, best known in Britain for its More Than insurance brand, signed a deal to dispose of 834 million pounds ($1.04 billion) of legacy insurance liabilities - policies that are closed to new customers - through a reinsurance deal with Enstar Group (>> Enstar Group Ltd.), the firms said late on Tuesday.

"It's going to help earnings, it's fantastic for capital and it reduces risk," Scott Egan said of the deal, for which RSA paid an insurance premium of 799 million pounds.

Egan also told Reuters the deal was the final leg in the firm's restructuring plan, started in 2014 by chief executive and former RBS (>> Royal Bank of Scotland Group plc) boss Stephen Hester.

The reinsurance, which will be followed by a legal transfer of the business to Enstar, means RSA has to set aside less capital against the risk of future claims, adding around 17-20 percentage points to the insurer's solvency ratio, a measure of its financial strength.

European Union solvency rules introduced in Jan 2016 require insurers to set aside sufficient capital to cover underwriting, investment and operational risk.

A 100 percent ratio is the minimum amount of capital required by regulators, but most insurers seek to be above those levels.

Egan said the disposal took RSA's ratio above its 130-160 percent target range, but declined to give more detail. Capital improvements will be used to retire debt in 2017, RSA said in a statement.

Panmure Gordon analyst Barrie Cornes said the disposal of the "book of nasties" made the investment case for RSA clearer. Cornes retained his "hold" rating on the stock but increased his target price to 600 pence from a previous 575 pence.

RSA's shares were up 1.9 percent at 597.75 pence at 1158 GMT on Wednesday, valuing the group at 6.1 billion pounds ($7.6 billion). At the same time the Stoxx Europe 600 insurance sector index <0#.SXIP> was up 0.3 percent.

A plan in 2015 by Zurich Insurance (>> Zurich Insurance Group Ltd) to buy RSA for 5.6 billion pounds ($7 billion) fell through due to problems in Zurich's business.

(Reporting by Carolyn Cohn; Editing by Greg Mahlich)