UK - British regulators believed Equitable Life "to be 'too good and too reputable' to make mistakes", according to a special committee of the European Parliament on the alleged mismanagement of the firm.
The committee, made up of 22 MEPs, has severely criticized the UK regulatory regime, as well as the Treasury and the Department for Trade and Industry, for its "excessive leniency" towards Equitable's solvency margin.
More specifically, a report produced by the MEP committee suggested a "light touch" regulatory policy in the UK contributed to "a weak regulatory environment".
Although the panel was not given any powers to force the payment of compensation to Equitable Life policyholders, it backed its rapporteur's view in demanding a compensation scheme to be set up by the UK government as they argue the country was "under an obligation to assume responsibility".
The regulatory body overseeing Equitable Life at the time it first saw its solvency position come under pressure was the Personal Investment Authority - now a part of the Financial Services Authority, which was created in December 2001 by rolling seven regulatory authorities into one organisation.
Equitable Life was forced to put itself up for sale in July 2000 when the UK High Court ruled it must pay guarantees it had promised to some policyholders should market conditions reach specified levels, and then found it was unable to do so.
The subsequent Equitable Life crisis has seen over one million policyholders in the UK and another 15,000 in other member states lose money.
While committee members noted the regulatory regime had improved since the Financial Services Authority took over as the UK regulator in 2001, the UK government was also criticized in the report for the way in which it had implemented EU insurance legislation.
MEPs concluded although laws were implemented via a series of legal acts, the process "lacks clarity" and "as a whole was flawed".
However, the panel also found fault with the European Commission's Third Life Directive.
The MEPs said the Directive left people to "fall between two stools" as victims of the Equitable Life crisis in member states outside the UK did not know which regulatory authority they should consult to seek redress.
It urged an amendment to the Directive which would see a clarification of defining "powers, roles and responsibilities of home an host member state authorities".
The paper filed by the committee will now be voted on in a plenary session of the European Parliament (EP) on June 19. The EP cannot make any amendments to the report and can only endorse or reject it.