The European Parliament is to investigate whether the UK authorities could have done more to protect policy holders from insurer Equitable Life's near collapse.

An estimated 15,000 people in the UK, Germany and Ireland suffered heavy financial losses five years ago when the insurer could not afford to pay out on policies taken out by members. Several investigations were launched in the UK, but these were criticized by some former investors for failing to recommend compensation. Investors lost GBP3.4 billion in total.

The European Parliament will set up a committee to head the inquiry, which will look into the UK government’s role in the scandal.

Equitable Life closed its doors to new business in December 2000 after the House of Lords ordered the company to honor policies sold in the 1970’s and 1980’s, leaving the mutual with a GBP1.5 billion deficit. The company managed to stay afloat by selling ongoing concerns to HBOS, and now administers policies through a number of closed life funds.