With the eurozone in crisis, along with the huge potential impact of sovereign default on some insurers, isn’t it worth biding our time on Solvency II until it has all played out?

One short month ago, an Italian default looked so unlikely that analysts were almost dismissive of the prospect. This week - gulp - it’s beginning to look a distinct, if still unlikely possibility. Then we’re in a whole new ball game. While UK insurers’ exposure to Greek sovereign debt is limited, exposure to Italy is not. Aviva, for example, has total exposure to Italian debt of £7.1bn (compared to a Greek exposure of just £100m). If Italy defaults, the consequences for general insurance, like the rest of the economy, are almost unthinkable.

But as the world watches Europe, plans for Solvency II press blithely ahead. Its progress has never been easy - and as we report this week, yet more delays are on the cards. But surely what the legislation really needs is a fundamental overhaul? It actively encourages insurers to invest in sovereign debt. As the events of recent weeks show, this is nothing short of madness.

When things don’t get done, it’s normally because they’re difficult. Solvency II is no exception. No one body has clear and simple accountability for the legislation. Yes, there’s the European Commission, but it’s answerable to the Council of Ministers, and they’ve got other things on their mind right now. It’s also accountable to the European parliament - not a byword for efficiency. Moreover, European insurers, having spent millions of pounds preparing for Solvency II, are understandably reluctant to see it go to the wall.

But let’s be realistic. First, the legislation cannot go through as it stands, and is already making poor progress. It will have to be reviewed in the light of the Eurozone crisis. Secondly, no one yet knows how far and how fast that crisis will continue to spread. And thirdly, until the European powers do know, Solvency II is very low on their agenda - and given the global economic meltdown on the cards, rightly so. There’s only one logical answer: preparations for Solvency II should be suspended pending a review of the legislation when the current crisis is played out.