Tiresome and costly, but a review is now the only option.

See also: Solvency II must change

Hearts will sink at this week’s headlines. Solvency II was that rare thing: an unwieldy piece of legislation that had won the support of the regulat-ees as well as the regulators, all the way across Europe. Indeed, it was a shining example of good practice, a beacon to the United States and other regions which had yet to develop an approach to cross border regulation. Insurers in the UK and across the Continent had spent tens of millions preparing their businesses.

But then the world changed. The past three weeks have seen the biggest shakedown in the financial markets since 1914 and it would be beyond foolish to ignore them. By the time Solvency II takes full force, in 2012, the markets will have comes to terms with the events of 2008, and have adapted accordingly. This piece of legislation needs to do the same.

Of course, there have always been concerns over the definition of fair value – this is nothing new. But as Philippe Maso has pointed out, recent events have bought it into such sharp focus that it can no longer be ignored.

The FSA batted away Insurance Times’ questions about Solvency II this week, saying there was no change to the implementation plans that had been in place for years. Why on earth not? Let us hope there are more serious discussions going on behind closed doors, for surely the regulator must see that there can be no more ‘business as usual’.

Insurers who have been quietly lobbying in Europe’s corridors of powers for a more flexible definition now have some serious ammunition. They should follow Maso’s example and use it.