Member states' representatives agreed a negotiating mandate (general approach) on the Insurance Recovery and Resolution Directive (IRRD). This proposal will reinforce the Solvency II Directive, in the aim to make the insurance and reinsurance sector more resilient and enhance the protection of policyholders, taxpayers, the economy and financial stability within the EU.
The Council’s position paves the way
for negotiations with the European Parliament to start in the new year,
in view of an agreement on the final text.
This is an important step forward to reduce risks for
policyholders and taxpayers, and strengthen financial stability and
trust in the internal market. The new directive will provide a framework
for cases where the Solvency II regime does not prevent the failure of
an insurance undertaking. The Solvency II framework generally works
well, but approximately ten EU insurers fail every year, with
significant impacts on policyholders. The Insurance Recovery and
Resolution Directive (IRRD) will provide harmonised resolution
procedures, making failures of insurance companies easier to handle,
especially in a cross-border context.
Zbyněk Stanjura, Minister for Finance of Czechia
For many social and economic activities, holding an insurance policy
is necessary to protect against potential risks. The disorderly failure
of insurers can have a significant impact on policy holders,
beneficiaries, injured parties or affected businesses. It can further
lead to or amplify financial instability and impact the real economy as a
whole or require exceptional recourse to public funds. There are
currently no harmonised procedures at European level for resolving
insurers, with substantial differences between member states leading to
uneven levels of protection for policy holders and beneficiaries.
The IRRD would introduce a harmonised regime at European level for
resolving insurers, to provide national authorities with similar
resolution tools and procedures to address failures. The proposal would
require member states to set up insurance resolution authorities, ensure
effective cooperation across borders, and grant the European Insurance
and Occupational Pensions Authority (EIOPA) a coordinating role. The
IRRD would ensure a level-playing field across member states and
safeguard policy holders’ interests. It would moreover minimise the
impact on the economy, the financial system, and any recourse to
taxpayers’ money, contributing to financial stability and trust in the
internal market for insurance and reinsurance.
In its position the Council welcomes the value of introducing a
harmonised minimum European framework for the recovery and resolution of
insurance undertakings, provided that this framework is proportionate,
adapted to the insurance sector and contributes adequately to the
protection of policyholders and the maintenance of financial stability
in the European Union’s single market.
It is important to establish common rules and at the same time leave
sufficient flexibility to national authorities to accommodate the
specificities of their insurance markets and address the characteristics
of the individual case. While national authorities need to have
sufficient powers to efficiently deal with insurance failures,
safeguards have to be put in place to ensure fair treatment of all
stakeholders, such as the principle that no creditor should be worse off
in resolution compared to a "normal" insolvency procedure.
Council
© Council of the European Union
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