The European parliament has backed the findings of an inquiry into the near-collapse of UK insurer Equitable Life, which has called upon the UK government to compensate the more than one million policyholders who were hit when the company experienced financial difficulties.

The European parliament (EP) has also backed the report’s demands that wide-ranging changes be made in the drafting and implementation of EU financial services legislation.

Diana Wallis, the report’s author, commented: I believe this report will assist the victims in a pincer movement with the UK parliamentary ombudsman, perhaps finally to deliver compensation. More importantly, I hope it will deliver a huge jolt to our institutions about our lawmaking processes and the European system of justice.

Although the EP report said that those customers that lost money did so primarily as a result of mismanagement by Equitable Life, it also argues that, given the UK government’s failure to comply with EU insurance law, notably the UK regulators’ failure to ensure that Equitable had sufficient reserves to pay its policyholders, the UK government should assume responsibility.

As a result, the report states that the government must devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders within the UK, Ireland, Germany and elsewhere.

The report asserted that the Equitable Life is far from being a purely British affair, as the victims were from several EU countries. In addition the report states that the case brought to light a number of broader, long-term concerns relating to the EU single market in services.

The report makes a raft of proposals on the nature and form of EU financial services legislation, and the role of the EP and the European Commission in monitoring the implementation of EU legislation in its member states.

Ms Wallis concluded that, if financial services providers are to continue to be allowed to operate cross-border legislation, outlining who is responsible for what needs to be implemented, so that the consumer rights of policyholders are not compromised. A number of Equitable customers outside of the UK had been unable to claim compensation.

While a support group for victims has welcomed the rulings, according to Reuters, members of the UK government have claimed that the report wrongly accuses it of not cooperating with the inquiry.