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Contents of a Recovery Plan: What European Insurers Can Learn From the Irish Experience (Part 1 of 2)
Gary is a Principal Consultant within our insurance practice in Dublin. He has 16 years of experience within the life and non-life (re)insurance sectors covering industry, audit and consultancy roles. His expertise covers financial reporting, prudential and conduct risk management, and assurance activities. Gary has provided outsourced actuarial, risk, compliance, and internal audit function services for a wider range of insurers, reinsurers and captives.
In April 2025, the European Insurance and Occupational Pensions Authority (EIOPA) (‘EIOPA’) presented its draft regulatory technical standards (‘RTS’), in the form of a consultation paper (EIOPA-BoS-25-097), to specify its expectations for contents of pre-emptive recovery plans. This consultation comes in advance of the introduction of the Insurance Recovery & Resolution Directive (‘IRRD’). Recovery planning is not a new concept for all (re)insurers in Europe, however. In 2021, the Central Bank of Ireland (‘CBI’) marked the introduction of recovery planning regulations for Irish domiciled (re)insurers by publishing their document 'Recovery Plan Guidelines for (Re)Insurers'.
This two-part article compares the EIOPA and CBI regimes, highlighting how European insurers can learn from the Irish experience whilst also examining differences between the two frameworks.
In Part 1, we consider:
- Contents of a Recovery Plan
- Description of the (Re)Insurance Undertaking
- Material Changes Between Plans
- The Suite of Recovery Indicators
- Rationale for Selecting Indicators
- Indicator Timeliness and Escalation Points
- Solvent Run-Off
- Recovery Plan Governance.
Contents of a Recovery Plan
Both EIOPA and CBI regimes are prescriptive regarding the headings for inclusion in a recovery plan. There is significant overlap in the section headings required.
Article 2 of the EIOPA draft RTS stipulates that the following headings should be included:
- Summary of the key elements, including material changes to the most recent plan;
- Description of the undertaking or the group, including a summary of any material changes since the most recent plan;
- Framework of indicators;
- How the plan has been drawn-up, how it will be updated and how it will be applied;
- Remedial actions;
- Communication strategy; and
- Assessment of any prior breaches of SCR.
Section 5.1 of the CBI guidelines, in comparison, requires the following headings:
- Summary
- Changes since the last recovery plan;
- Approval of recovery plan;
- Governance;
- Strategic analysis;
- Recovery indicators
- Recovery options;
- Scenario analysis;
- Communication plan; and
- Information on preparatory measures.
Description of the (Re)Insurance Undertaking or Group
Article 3(1) of the RTS bears similarities to Section 5.6 of the CBI document with both requiring a clear description of the undertaking including:
- Information on core business lines and critical functions;
- Global activities and jurisdictions operated in;
- Details of legal structure of the group and subsidiary entities; and
- Intergroup interconnectedness including counterparty exposures, distribution arrangements, cost sharing arrangements, and group loans or guarantees.
The CBI requirements further oblige undertakings to consider the ability to separate the insurer from its broader group and actions needed to secure continuity of critical functions upon such separation.
Material Changes Since Prior Recovery Plan
Article 3(3) of the RTS states that insurers should include details on any material changes since the prior plan. Section 5.3 of the CBI has a similar objective, albeit adopts a more prescriptive approach requiring explicit inclusion of any changes to:
- governance arrangements;
- business strategy or risk profile;
- operating model;
- corporate structure;
- recovery options considered in the plan or their relative prioritisation;
- the structure or calibration of recovery indicators;
- scenarios considered within the plan; and
- changes resulting from the implementation of previously identified preparatory measures.
Suite of Recovery Indicators
Article 4(1) of the RTS and Section 5.7 of the CBI document both require insurers to include a framework of recovery indicators in their recovery plans. Clear triggers, limits and thresholds that are forward-looking are required under both.
Both frameworks also call for a series of leading indicators tailored specific to the insurer's business model and key vulnerabilities. Article 4(2) of the RTS adopts a principals-based approach with insurers required to develop indicators relevant to their business. Indicators relating to capital are the only explicitly stated minimum requirement.
Section 5.7 of the CBI document is more prescriptive and lists categories of recovery indicators which should be considered, including:
- solvency indicators;
- liquidity indicators;
- profitability indicators;
- reserving indicators;
- market-based indicators; and
- macroeconomic indicators.
The Annex to the CBI guidelines includes additional guidance on what could be included within each of the above indicator categories. Solvency- and liquidity-related indicators are considered compulsory at a minimum.
Rationale for Selecting Indicators
Both frameworks stipulate that insurers should include explanations on the choice of indicators included. Again, however, IRRD is less prescriptive, simply stating that rationale should be provided.
Section 5.7(3) of the CBI guidelines states that the framework of indicators which must be:
- adapted to the insurer’s business and risk profile;
- reflective of the insurer’s size and complexity;
- define the point at which action should be taken including the point of closure to new business; and
- be forward-looking with triggers that provide sufficient warning.
An insurer should be able to provide the Central Bank with an explanation of how the specific calibrations of the recovery indicator thresholds have been determined.
Indicator Timeliness and Escalation Points
Both regimes emphasise the importance of indicators being designed to allow sufficient time for Boards and regulators to react and respond to emerging stress events. Though again, the CBI’s requirements are more detailed:
- Quantitative indicators should use a traffic light system (or similar).
- Indicator triggers should be reviewed and recalibrated on each revision of the recovery plan.
- The monitoring of recovery plan indicators should be undertaken on a frequent basis.
- The internal reporting systems of the insurer should ensure an easy and frequent monitoring of the indicators.
Solvent Run-Off
The CBI document, Section 5.7(4), make explicit reference to factors that should be considered in determining the point of closure to new business, namely:
- governance structures;
- impact on critical functions;
- future expense projections;
- ongoing capital and liquidity requirements; and
- parts of the business that may be sold during run-off and the costs of doing so.
Solvent run-off indicators do not receive focus under the IRRD proposed rules.
Recovery Plan Governance
Both frameworks expect recovery plan governance to be integrated into the insurer’s normal systems of governance. Under both sets of requirements, sufficient narrative description must be provided to detail how the recovery plans were drawn up, and how plans would be implemented in a stressed scenario.
Plans should include specific details around:
- roles and functions involved in drawing up the plan, and their responsibilities in ongoing maintenance;
- how the plan aligns with group or subsidiary plans;
- the policies and procedures for invoking the recovery plan including triggers, escalation process, decision making process and selection of remedial action(s);
- definition of roles and responsibilities at each stage of the process; and
- how the plan is integrated into normal systems of governance including alignment with the ORSA.
While both regimes are very similar, IRRD places a little extra emphasis on factors that could trigger ad-hoc updates to recovery plans (Article 5). The CBI stresses the need to explore reporting and operational capacity under stressed conditions, and any impediments to such. The Irish regime also homes in on preparatory measures taken to improve effectiveness of the plan (Section 5.4 and 5.11).
Recap
While different terminologies may be used, both European and Irish regulations bear great similarities around recover planning expectations in respect of plan contents, recovery indicators and governance. The Irish requirements are slightly more prescriptive in places, though such prescriptiveness can offer useful guidance for those drawing up first time recovery plans.
In Part 2 of this article we will scrutinise remedial actions, scenario analysis and communications strategies.
Frequently Asked Questions
A pre-emptive recovery plan is designed to help insurers prepare for severe financial stress by outlining actionable steps to restore financial stability while remaining solvent. Both the IRRD (via EIOPA) and the Central Bank of Ireland (CBI) frameworks aim to ensure that insurers can respond promptly to emerging risks through predefined indicators, governance procedures, and recovery options. These plans are not only regulatory obligations but also serve as practical tools for strengthening operational resilience.
While both EIOPA and the CBI require broadly similar elements - such as recovery indicators, governance frameworks, and summary sections - the CBI guidelines are generally more prescriptive. For instance, the CBI specifies categories of indicators (e.g., solvency, liquidity, profitability) and requires detailed rationales for indicator selection. EIOPA, by contrast, adopts a more principles-based approach, allowing for flexibility but also placing more onus on insurers to justify their methodologies.
Ireland’s earlier implementation of recovery planning regulations has provided valuable clarity and precedent for what robust plans look like in practice. The CBI’s prescriptive approach offers insurers concrete examples and expectations - especially helpful for firms preparing recovery plans for the first time under the upcoming IRRD. By studying the Irish framework, insurers can better understand regulatory expectations, avoid common pitfalls, and build plans that are both compliant and operationally effective.