Recovery and Resolution

The Directive for the recovery and resolution of insurance and reinsurance undertakings (IRRD) introduces a new legal framework from 30.01.2027, which both supervisory and resolution authorities as well as insurance undertakings need to prepare for. The Insurance Recovery and Resolution Directive (IRRD) creates an EU-wide harmonised framework for the recovery and resolution of insurance and reinsurance undertakings.

The new recovery and resolution framework will introduce inter alia:

• standards for preventive recovery plans, to be able to act quickly to crises,
• harmonised rules for resolution plans as well as the creation of national resolution authorities,
• conditions for the resolution of supervised entities,
• harmonised resolution tools and powers.

The objective is to enhance financial market stability, to protect insurance policyholders and to ensure the orderly resolution of distressed entities. It focuses on the one hand on pre-emptive recovery planning and effective crisis preparation. On the other hand, it aims at minimising the negative effects of a company failing on insurance policyholders, the financial system, the real economy and public funds as far as possible. A further resolution objective is ensuring continuity of services of (re)insurance undertakings that are unable to be substituted easily within a reasonable timeframe and at a reasonable cost (critical functions).

Pre-emptive recovery planning

​Recovery planning should pre-emptively contribute towards preparing (re)insurance undertakings for crisis situations. (Re)insurance undertakings that meet specific criteria shall be required to pre-emptively draw up a recovery plan and to submit it to the supervisory authority. At least 60% of the market is subject to this obligation. The recovery plan shall include actions, that undertakings can take in the event of a significant deterioration of their financial situation. The content of pre-emptive recovery plans will be defined more closely by means of implementing technical standards and the scenarios they contain and indicators defined by means of Guidelines.

Resolution planning

Resolution plans are required to be drawn up by the resolution authority for specific (re)insurance undertakings that describe resolution strategies and actions and an assessment of resolvability undertaken. Resolution plans are intended to be drawn up for at least 40% of the market. Supervised entities are required to cooperate in the drawing up of such plans and to provide all necessary information for doing so.

​Legal bases

Directive for the recovery and resolution of insurance and reinsurance undertakings – IRRD (Directive (EU) 2025/1)

EIOPA has been awarded mandates to draw up six Guidelines and twelve Implementing and Regulatory Technical Standards to be drawn up in three tranches:

Tranche 1

• Final report on the Draft Regulatory Technical Standards (RTS) on the content of pre-emptive recovery plans
• Final report on the Draft Regulatory Technical Standards on criteria for pre-emptive recovery planning requirements and methods to be used when determining the market shares
• Final report on the Draft Regulatory Technical Standards on the content of resolution plans and group resolution plans
• Final report on the Guidelines on the criteria for the identification of critical functions
• Final report on the Guidelines on the assessment of resolvability
• Final report on the Guidelines on measures to remove impediments to resolvability and the circumstances in which each measure may be applied

Tranche 2

• Guidelines on scenarios
• Guidelines on indicators
• Guidelines on the provision of information
• Guidelines on simplified obligations
• RTS on the independence of valuers
• RTS on contractual recognition of resolution stay powers
• RTS on the valuation of liabilities from derivatives