France seeks to broker deal on EU insurance rules

By Huw Jones

BRUSSELS, July 15 (Reuters) - Supervisors of insurance branch operations outside their home country in the European Union will be beefed up to end deadlock over draft EU rules for the 7 trillion euro ($11.17 trillion) sector, the bloc's president France said on Tuesday.

"The solution we have suggested is a compromise, a halfway house between different potential solutions," French Economy Minister, Christine Lagarde told the European Parliament.

European Commission proposals known as Solvency II are before the EU assembly and governments for approval but a provision to radically change how cross-border insurers are supervised still divides EU states.

Under the EU executive's plan the home country supervisor of a cross-border company would have the last say on how much capital the company must set aside to cover overall liabilities, including those held in subsidiaries elsewhere in the EU.

Big groups such as Generali (GASI.MI), Allianz (ALVG.DE), Axa (AXAF.PA) and Aviva (AV.L) say this will cut compliance costs and save money to reinvest in new products.

But it has left countries with branches of big groups in eastern Europe fearing they will hold little sway over how capital requirements are determined and worry that requests for a parent elsewhere to top up capital locally will not be heeded.

France wants to tackle the divide and reach a political deal before its presidency ends in December without diluting the Commission's proposal too much.

"There needs to be a minimum level of leadership which should be placed in the country that has the headquarters," Lagarde said.