In September 2021, the EU came one step closer to creating a harmonised regime for resolving failed insurers. Following EIOPA’s Solvency II review (on which Finalyse commented) and its advice to create a harmonised resolution regime, the European Commission published its proposal for an Insurers Recovery and Resolution Directive (“IRRD”).
The Directive is planned to be voted on in the European Parliament in early 2023 and it can be still modified in the intervening period. If the EU Parliament passes the Directive, it will come into force six months later. Within 18 months after the entry in force, EIOPA will issue technical standards and guidelines.
The legislator chose a directive as a legal tool to introduce recovery and resolution planning because a directive must be transposed into member-state national law. This will end the fragmented landscape of national resolution legislation and create a level playing field. Most EU member states don’t even have resolution legislation specific to insurers; as a result, the broad bankruptcy legislation applies for them.
The IRRD has the ambition to improve policy holder’s and claimant’s protection and to prevent taxpayers having to bail-out poorly managed insurance companies. However, the Directive will create an additional administrative burden for most insurers, so that it is worth taking a closer look at what to expect.