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In addition to responding to the specific questions posed in the consultation, EIOPA would like to provide input on some more general issues on recovery and resolution. These issues are likely to come up in the development of a comprehensive and meaningful policy for recovery and resolution.
The development of recovery and resolution frameworks has its roots in the current, primarily banking-led crisis. As a result, recovery and resolution frameworks for banking have been developed first and reflect the specific systemic significance and financial interconnectedness of the banking sector. In addition the particular or special nature of banks has also shaped international thinking on resolution and recovery policy.
Examination of the (re)insurance sector from a financial stability perspective has revealed (re)insurers to have a more stable business model; to be relatively less interconnected; and, in some cases, to be more substitutable than banks. There are, however, activities undertaken by insurers that have systemic impact and these have been the focus of IAIS work to identify systemically important insurers. The systemic significance of the insurance sector is considered to be less than that of the banking sector, but it has systemic significance nonetheless.
Nevertheless, the broader economic significance of the insurance sector must be acknowledged, since insurance serves a number of key economic functions. It is a facilitative business in so far as insurance facilitates other economic activities, for example trade credit insurance, public and employers’ liability and transport insurance underpin broader economic activity. Life insurance allows policyholders to smooth their incomes and is a key savings channel through which funds are invested in capital and debt instruments, as well as other assets.