23rd January 2022
Insurance Europe has published its response to a Better Regulation consultation conducted by the European Commission(EC) on its proposals for the establishment of an Insurance Recovery and Resolution Directive (IRRD).
The EC’s proposals to implement a framework for recovery and resolution go beyond what is necessary given the extensive safeguards that are already in place to protect policyholders. In view of the specific characteristics of the insurance business and the existing instruments under Solvency II, there is no need for such an extensive IRRD.
Furthermore, simply applying a banking recovery and resolution style regime to the insurance industry without considering insurance specifics is highly inappropriate and would undermine the different resolution processes of a failing insurer.
Instead, the EC should strive to achieve a framework which is aligned with internationally agreed standards and should take care not to overburden insurers with unnecessary and costly requirements.
Insurance Europe has also identified the following key areas of concern:
-The requirement for any (re)insurance undertaking to prepare pre-emptive recovery plans or to be subject to resolution planning should be linked to the resolution objectives, notably whether they are essential to the continuity of critical functions and should be determined via a set of risk-based criteria:
-The EC’s proposal to impose a minimum national market coverage for recovery and resolution planning of 80% and 70% respectively is not related to the resolution objectives or the provision of critical functions and is not supported by the industry.
-The EC proposals foresee a large number of new powers for supervisory and resolution authorities. While the industry recognises the need to create sufficient powers for authorities to carry out their duties, many of the proposals would give the European Insurance and Occupational Pensions Authority EIOPA) and the national supervisory authorities (NSAs) very intrusive and arbitrary powers.
-The proposals would also result in a significantly increased role for EIOPA in the development and oversight of the recovery and resolution regime. The increased role of EIOPA is likely to result in an unwelcome shift in the balance of power between it and the NSAs/resolution authorities.
Insurance Europe Trends(339 articles)