Complying with Brussels' latest insolvency proposals for an EU-wide insurance market could cost the UK life and non-life insurance industry £500m, according to the Commons European Scrutiny Committee.

MPs estimat the industry's costs will be in line with its one quarter share of the EU market and warn that a more detailed estimate will not be available until a major quantitative impact study is completed for a regulatory impact assessment later this year.

The committee report says the proposed prudential regime for what is known as Solvency II is broadly similar to the UK's current regime. However, moving to an EU regime will reduce the risk that UK insurers will face a higher regulatory burden than local insurers when operating in other member states because companies will only have to comply with one set of principles and rules, and there will be a streamlined approach to group supervision, thereby reducing costs.

The committee said there is potential for benefits for customers and the UK industry when the draft directive is agreed towards the end of next year.