BRUSSELS, April 22 (Xinhua) -- The European Parliament approved on Wednesday a proposed Directive aimed at lowering cost in monitoring multinational insurance companies.

    The endorsement of the parliament in its plenary session in the French city of Strasbourg of the Directive, also called Solvency II Directive, paved the way for it to go into effect by 2012.

    Under the new system, insurers and reinsurers would be required to take account of all types of risk to which they are exposed and to manage those risks more effectively and with increased transparency.

    In addition, insurance groups would have a dedicated "group supervisor" that would enable better monitoring of the group as a whole.

    The document is expected for a "swift adoption by the EU's Council of Ministers" after the parliament approval as "intensive negotiations between the Parliament, the Council and the Commission over the recent months have prepared the ground," said a statement from the Commission on the same day.

    "By approving the Commission's proposal, the European Parliament has contributed to lasting economic recovery," welcomed Commission President Jose Manual Barroso.

    "An integrated and competitive insurance sector, supervised consistently across borders, is essential for every consumer and every business in Europe," he added.

    He said that the new rules would help protect policy holders from bad practice and "help shield our economies against a repeat of the disastrous excessive risk taking by financial institutions, including certain insurance operators, that has contributed to the global crisis."

    "We need Solvency II more than ever as a first response to the present financial crisis," said Internal Market and Services Commissioner Charlie McCreevy.

    "We need regulation that requires companies to properly manage their risks; that increases transparency; and that ensures that supervisory authorities cooperate and coordinate their activities more effectively."

    Regarding the "group support regime" as one of the most innovative aspects of the proposal and a key element in modernizing the supervisory arrangements for cross-border insurers, McCreevy expressed his personal regret that "it is not now part of the package."

    The approved directive eliminated a proposal by the Commission for "group support" setting how much capital insurance companies should put at store to deal with risk across all their European businesses, leaving each nation to decide separately.

    Solvency II, part of the Commission's Better Regulation strategy, is to replace 14 existing directives.