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The existing fragmented landscape of national recovery and resolution frameworks could cause significant barriers to the resolution of (re)insurers, particularly of crossborder groups. To reduce this risk, to avoid unnecessary economic cost stemming from uncoordinated decision-making processes between national authorities and to ensure orderly resolution European action is required. Therefore, EIOPA calls for a minimum degree of harmonisation in the field of recovery and resolution for (re)insurers with the objective to increase policyholder protection and financial stability in the European Union. To achieve this objective EIOPA proposes the following four building blocks where the definition of a common approach is key:
The harmonised recovery and resolution framework should cover all (re)insurers subject to the Solvency II framework and to be applied in a proportionate manner. The proportionality principle should guide and allow Member States to waive certain requirements of the framework such as developing and maintaining pre-emptive recovery and resolution plans for specific insurers.
Gabriel Bernardino, Chairman of EIOPA, said: “EIOPA’s call for a harmonised European framework for the recovery and resolution of (re)insurers is another important step towards a more robust and stable insurance market for the benefit of policyholders. A comprehensive recovery and resolution framework is essential for effectively dealing with distressed undertakings, particularly in the current macroeconomic environment. National competent authorities need to be equipped with a broad set of powers to establish an effective and orderly resolution. EIOPA will continue its work in the area of recovery and resolution focussing on resolution funding and insurance guarantee schemes.”