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Insurance recovery and resolution

The EU provides a framework for authorities to manage insurance failures effectively.


Insurance policies play an important role in the lives of the majority of European citizens. For many of the things people do every day, holding an insurance policy is essential to protect against potential risks. An insurance policy can also be a savings product, which will allow policyholders to provide for their long-term welfare while insurers are able to channel these savings via financial markets into the real economy.

The disorderly failure of an insurer can therefore have a significant impact on policyholders, beneficiaries, injured parties or affected businesses. This is especially the case where a substitute for vital insurance services cannot be found in a reasonable amount of time and at a reasonable cost.

Resolution is the last resort, and should only occur when national authorities determine that a failing (re)insurer cannot go through normal insolvency proceedings without harming consumers or businesses or causing financial instability more broadly.

Insurance Recovery and Resolution Directive

On 22 September 2021 the Commission adopted a proposal for an Insurance Recovery and Resolution Directive (IRRD).

The proposed directive will allow authorities to

  • protect policyholders, beneficiaries and claimants
  • maintain financial stability
  • ensure the continuity of the (re)insurer’s critical functions
  • protect public funds by minimising reliance on extraordinary public financial support

It will provide authorities with

  • comprehensive and effective arrangements to prepare for and deal with (near)failures of (re)insurers at national level
  • cooperation arrangements to tackle cross-border (re)insurance failures

Normal insolvency proceedings will remain the alternative path for the whole or parts of a (re)insurer that cannot be resolved.

The directive will require (re)insurers to formulate pre-emptive recovery plans to facilitate prompt remedial action and ensure they are prepared should problems arise. It also grants national authorities powers to guarantee an orderly resolution of failing (re)insurers by ensuring as far as possible the continuity of the insurance coverage. This improves the outcome for consumers and limits recourse to taxpayers’ money.

The proposed EU (re)insurance resolution framework will ensure that (re)insurers' shareholders and creditors pay their share of the costs associated with a failure.