New rules have been introduced in the European Union aimed at removing risk in the insurance industry and providing extra protection for policyholders.
The supervisory framework of the insurance industry is set for major changes following a vote in the European Parliament on Wednesday.
MEPs voted overwhelmingly for the legislation, labelled Solvency II. It is intend to improve the financial stability of the insurance sector, by forcing companies to adhere to stricter rules on risk assessment.
Lawmakers have been keen to strengthen the insurance industry and boost investor confidence in the sector, which has been rocked by the credit crunch. American insurance giant AIG was one of the highest profile victims, suffering a liquidity crisis in September last year.
The legislation seeks to synchronise standards among regulators in the different EU member states, along with fostering a culture of collaboration. The wording of the new rules - which are due to come into effect in 2012 - had been the subject of lengthy negotiations between the European Parliament and the Council of Ministers.
The agreement and subsequent vote was welcomed by insurance industry lobby group CEA, which has members from across the EU. "We welcome the vote and thank the parliament for its hard work in ensuring that an enhanced regulatory regime for Europe's insurers will become reality," said director general Michaela Koller.
