EQUITABLE Life policy ho lders are entitled to a compensation scheme set up by the UK government, according to a draft report unveiled yesterday by a European Parliament (EP) committee of inquiry.
The report stated the UK government is "under an obligation to assume responsibility" for victims of the Equitable Life "debacle".
But the European Union (EU) assembly has no power to offer compensation or force the British government to pay up.
The report also argued that EU law and policy making must be overhauled to prevent such cases in future and to encourage the development of a healthy European pensions and insurance market.
The EP inquiry was set up in January 2006 in response to petitions received by parliament from policy holders who were among the victims of the financial crisis at the Equitable Life Assurance Society (ELAS).
In the mid-1990s, the world's oldest insurance company ran into difficulties.
Its near demise came in December 2000 when the House of Lords overturned its decision to cut final payouts on some policies.
The company had to set aside £1.5 billion to cover the liability and closed its doors to new business in 2001. Its activities came under scrutiny and a number of reports on the crisis have been published.
But around one million British policy holders are still facing financial loss and are seeking compensation.
At the discussion yesterday in the EP, the UK regulatory system - including the Financial Services Authority, the Treasury and the Department of Trade and Industry - was severely criticised for "excessive leniency".
During the debate, British Conservative and Liberal members clashed with Labour.
Labour MEP Peter Skinner said the report did not recognise new EU rules put in place to protect consumers. He said: "If Solvency II had been in place, there probably would not have been an Equitable Life [crisis]."
Sharon Bowles, a Liberal member of the committee, said: "I am not 100 per cent confident at this stage that Solvency II ticks all the boxes."
And Conservative Neil Parish accused Skinner of complacency and employing "spoiling tactics".
Yesterday's draft report has to be put to the vote by the committee on 8 May.
The Treasury oversaw Equitable at one point and a separate Parliamentary Ombudsman's final report is due in the summer, with powers to order compensation.
