This Directive establishes a comprehensive framework for the recovery and resolution of insurance and reinsurance undertakings in the EU. It aims to ensure orderly resolution of failing insurers while protecting policyholders and maintaining financial stability. The Directive introduces tools and powers for authorities to intervene early and resolve insurers in an orderly way.The Directive’s structure includes:
- Preparation requirements – Recovery and resolution planning, resolvability assessments
- Resolution tools – Sale of business, bridge institution, asset separation, write-down/conversion of capital instruments
- Resolution powers – Taking control, transfer of assets/liabilities, suspension of payments
- Safeguards – Protection of shareholders and creditors, right of appeal
- Cross-border cooperation – Resolution colleges, recognition of third country proceedings
Key provisions include:
- Requirement for insurers to prepare recovery plans and authorities to prepare resolution plans
- Powers for authorities to remove impediments to resolvability
- Resolution tools to maintain critical insurance functions and protect policyholders
- Safeguards ensuring no creditor worse off than in liquidation
- Framework for cooperation between authorities in cross-border cases
- Requirement for Member States to establish resolution financing arrangements
The Directive represents a major change by introducing a harmonized EU framework for insurance resolution, similar to the banking resolution framework but adapted to insurance specificities. It fills an important gap in the EU financial stability framework.
