Insurers are breathing a sigh of relief after a last-minute deal struck by the European parliament has allayed industry fears over the Solvency II directive.

A package of measures easing the capital burden for insurers will be reinserted ahead of next Wednesday’s important Economics and Monetary Affairs Committee vote on Solvency II.

“The lobbying by the industry has clearly paid off,” said Paul Clarke, global Solvency II leader at London-headquartered accountancy firm PricewaterhouseCoopers. “It is a positive development that [the European] parliament has recognized how vital maintaining the matching premium is on insurers’ ability to continue to provide affordable long-term annuity products.

“It is a great relief for many insurers that the matching premium looks set to be included in the parliament’s proposals, albeit under a different name—matching symmetrical adjuster. Without this, consumers could be left facing reductions in the range of products on offer and increases in product prices.”

Without the matching premium, insurers would have been forced to hold significantly more capital to support their annuity business. Insurers argued that without a matching premium then life insurers and pension schemes would have had to have enough capital to protect themselves against sharp falls in the market value of their assets, even though their liabilities stretched for over 25 years. The U.K. annuity sector alone is valued at £12bn a year.

The European Commission was also forced to issue a statement earlier this week defending the Solvency II proposals following a barrage of criticism from the U.K.

“There are a few issues which indeed remain to be solved [on Solvency II],” the Commission said in a statement. “But they should not be exaggerated. And we count on all parties involved, including Prudential, to work constructively in order to find suitable solutions to them. It’s up to member states and the European parliament to conclude negotiations now. But there is no need for alarm.”

Global insurer Prudential, which has its headquarters in the U.K., issued a warning to the European Union that it will have to move its base from London to Asia in a bid to avoid Solvency II. And the Bank of England’s deputy governor, Paul Tucker, added to the clamour by saying he was “dismayed by how much it is costing the industry and regulator [the Financial Services Authority] to adapt to Solvency II”.

However, Clarke at PwC was still wary of claiming outright victory for the insurance industry. “The important thing now is to wait and see what detail comes out on Wednesday as there is still a note of caution about the degree of alterations that may be made,” he said. “Overall, this is a positive battle for the industry to have won on Solvency II.”

The directive, once it passes through the European parliament, will go to the Council of Ministers for final adoption, and is due to become law in January 2013 ahead of full implementation a year later.