BETA


2021/0296(COD) Framework for the recovery and resolution of insurance and reinsurance undertakings
Next event: Indicative plenary sitting date 2024/04/22

Progress: Awaiting Parliament's position in 1st reading

RoleCommitteeRapporteurShadows
Lead ECON FERBER Markus (icon: EPP EPP) LALUCQ Aurore (icon: S&D S&D), YON-COURTIN Stéphanie (icon: Renew Renew), HAHN Henrike (icon: Verts/ALE Verts/ALE), ZANNI Marco (icon: ID ID), VAN OVERTVELDT Johan (icon: ECR ECR), MACMANUS Chris (icon: GUE/NGL GUE/NGL)
Committee Opinion JURI
Lead committee dossier:
Legal Basis:
TFEU 114

Events

2024/04/22
   Indicative plenary sitting date
2024/01/29
   EP - Approval in committee of the text agreed at 1st reading interinstitutional negotiations
Documents
2024/01/24
   CSL - Coreper letter confirming interinstitutional agreement
2024/01/24
   EP - Text agreed during interinstitutional negotiations
Documents
2023/09/13
   EP - Committee decision to enter into interinstitutional negotiations confirmed by plenary (Rule 71)
2023/09/11
   EP - Committee decision to enter into interinstitutional negotiations announced in plenary (Rule 71)
2023/07/26
   EP - Committee report tabled for plenary, 1st reading
Details

The Committee on Economic and Monetary Affairs adopted the reported by Markus FERBER (EPP, DE) on the proposal for a directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of insurance and reinsurance undertakings and amending Directives 2002/47/EC, 2004/25/EC, 2009/138/EC, (EU) 2017/1132 and Regulations (EU) No 1094/2010 and (EU) No 648/2012.

As a reminder, the aim of this proposed directive is to make the insurance and reinsurance sector more resilient and enhance the protection of policyholders, taxpayers, the economy and financial stability within the EU. Moreover, the new directive will provide a framework for cases where the Solvency II regime does not prevent the failure of an insurance undertaking. 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.

The committee responsible recommended that the European Parliament's position adopted at first reading under the ordinary legislative procedure should amend the proposal as follows:

Scope

The amended text reinforces the role of the European Insurance and Occupational Pensions Authority. The EIOPA should be informed of any additional or stricter rules adopted by Member States, other than those laid down in the directive.

Resolution plans

Members added that the resolution plans should also contain a preliminary assessment of the feasibility and credibility of the winding up under normal insolvency proceedings or of resolution actions. Resolution authorities should draw up resolution plans for each insurance and reinsurance undertaking that is subject to pre-emptive recovery planning requirements provided they assess that the public interest would be positive in the event of a failure or for which a critical function exists. This assessment should be made on the basis of the resolution objectives and criteria such as size, business model, risk profile, interconnectedness, substitutability and cross-border activity .

Group resolution plans

The amended text suggested that Member States should ensure that group resolution authorities draw up group resolution plans to be activated in case the ultimate parent undertaking or one of the material undertakings within the group risks experiencing a significant deterioration of its

financial position.

Financial arrangements

Financing arrangements should be established in each Member State to compensate policy holders of insurance and reinsurance undertakings authorised in that Member State. While directly absorbing the losses of an insurance company should be avoided, it should be possible to use such financing arrangements to finance other costs associated with the use of resolution tools as a last resort, to the extent necessary to achieve the resolution objectives and insofar as the resolution principles are fully respected. Acknowledging the diversity in insurance markets, Member States should be given some flexibility in relation to the precise arrangements of external financing as long as the availability of sufficient liquidity to guarantee compensation within a reasonable timeframe is ensured. A Member State should impose a contribution obligation only to insurance and reinsurance undertakings authorised in that Member State and to Union branches of a third country undertaking which are established in its territory.

Policy-holder protection

The report stated that the global financial crisis showed the need for high levels of protection for policy holders. The introduction of insurance guarantee schemes (IGSs) should therefore be advanced. A harmonised framework of national insurance guarantee schemes would help to minimise reliance on public funds by providing equal protection to policy holders and beneficiaries in the event of an insurer’s insolvency. The current lack of homogeneity between national IGSs leads to unequal treatment of policy holders and beneficiaries of to the same insurer, as demonstrated by recent cross-border insurance failures. After sufficient experience in the application of this Directive has been gained, the Commission, after consulting EIOPA, should evaluate and report to the European Parliament and the Council on the possibility of introducing harmonised minimum basic requirements for insurance guarantee schemes in the Union and the steps that would be necessary in order to do so.

Review

By 1 January 2026, the Commission, after having consulted EIOPA, should submit a report to the European Parliament and to the Council on the application of this Directive.

Documents
2023/07/18
   EP - Vote in committee, 1st reading
2023/07/18
   EP - Committee decision to open interinstitutional negotiations with report adopted in committee
2022/07/18
   EP - Amendments tabled in committee
Documents
2022/06/02
   EP - Committee draft report
Documents
2022/02/23
   ESC - Economic and Social Committee: opinion, report
Documents
2022/01/04
   SE_PARLIAMENT - Contribution
Documents
2021/11/22
   EP - Committee referral announced in Parliament, 1st reading
2021/10/25
   EP - FERBER Markus (EPP) appointed as rapporteur in ECON
2021/09/23
   EC - Legislative proposal published
Details

PURPOSE: to establish a European framework for the recovery and resolution of insurance and reinsurance undertakings.

PROPOSED ACT: Directive of the European Parliament and of the Council.

ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council.

BACKGROUND: insurance policies form an integral part of the daily life of European citizens. For many social and economic activities, holding an insurance policy is necessary to protect against potential risks. They also include savings products, which will determine the long-term welfare of their holders. The disorderly failure of insurers can therefore have a significant impact on policy holders, beneficiaries, injured parties or affected businesses. The management of a near-failure or the failure of certain insurers, particularly large cross-border groups, or the simultaneous failure of multiple insurers can also lead to or amplify financial instability.

Although Directive 2009/138/EC (Solvency II Directive) of the European Parliament and of the Council aimed at strengthening the financial system in the EU and the resilience of insurance and reinsurance undertakings, it did not completely eliminate the possibility of failures of such insurance and reinsurance undertakings.

Moreover, there are currently no harmonised procedures at European level for resolving insurers . This results in considerable substantive and procedural differences between the laws, regulations and administrative provisions that govern the failure of insurers in the Member States. A regime is therefore needed to provide authorities with a credible set of resolution tools to intervene sufficiently early and quickly if insurers are failing or likely to fail to ensure a better outcome for policy holders, while minimising the impact on the economy, the financial system and any recourse to taxpayers’ money.

CONTENT: the proposed Directive seeks to harmonise national laws on recovery and resolution of insurers or introduces such a framework if there is none yet, to the extent necessary to ensure that Member States have the same tools and procedures to address failures. The harmonised framework would also safeguard the interests of policy holders and preserve the real economy. It would contribute to financial stability and trust in the internal market for insurance and reinsurance.

The proposal addresses crisis management and provides for a comprehensive package of measures including, inter alia , the following elements:

Prevention and preparedness

The proposal requires insurance and reinsurance undertakings established in the EU and subject to the ‘Solvency II’ regulatory framework to develop preventive recovery plans, in order to be better prepared for a possible crisis and to be able to take prompt remedial action if a crisis occurs.

Set-up of resolution authorities

This proposal requires Member States to set up insurance resolution authorities , equipped with a minimum harmonised set of powers to undertake all the relevant preparatory and resolution actions. The proposal does not specify the particular authority that should be appointed and can therefore be for example national central banks, competent ministries, public administrative authorities or other authorities entrusted with public administrative powers.

Resolution tools

The framework would provide national authorities with resolution tools to intervene early and quickly enough in the event of failure or risk of failure of insurers. These instruments would maintain insurance cover for policyholders, beneficiaries and injured parties and allocate losses in a fair and predictable manner.

Cross-border group resolution

To take account of the cross border nature of some insurance groups and create a comprehensive and integrated framework for recovery and resolution actions in the Union, resolution colleges will be established under the leadership of the group resolution authority and with the participation of the European Insurance and Occupational Pensions Authority (EIOPA). The objective of the colleges is to coordinate preparatory and resolution measures among national authorities to ensure optimal solutions at Union level.

Changes to the Solvency II Directive

This proposal clarifies supervisory authorities’ powers to impose preventive measures to insurers in cases of deteriorating financial positions or breaches of regulatory requirements, to avoid the escalation of the problems at a sufficiently early stage of deterioration.

Penalties

In order to ensure compliance by insurers, those who effectively control their business and their administrative, management or supervisory body with the obligations deriving from this proposal, Member States should provide for administrative sanctions and other administrative measures which are effective, proportionate and dissuasive. EIOPA should maintain a central database of all administrative sanctions.

Implementation

The proposal requires Member States to transpose the recovery and resolution rules in their national laws within 18 months from the entry into force of this proposal. National authorities should report to EIOPA on the application of simplified obligations on an annual basis, which EIOPA should in turn disclose.

Documents

  • Approval in committee of the text agreed at 1st reading interinstitutional negotiations: PE758.182
  • Coreper letter confirming interinstitutional agreement: GEDA/A/(2024)000531
  • Text agreed during interinstitutional negotiations: PE758.182
  • Committee report tabled for plenary, 1st reading: A9-0251/2023
  • Amendments tabled in committee: PE732.672
  • Committee draft report: PE732.670
  • Economic and Social Committee: opinion, report: CES5378/2021
  • Contribution: COM(2021)0582
  • Legislative proposal published: COM(2021)0582
  • Legislative proposal published: EUR-Lex
  • Economic and Social Committee: opinion, report: CES5378/2021
  • Committee draft report: PE732.670
  • Amendments tabled in committee: PE732.672
  • Coreper letter confirming interinstitutional agreement: GEDA/A/(2024)000531
  • Text agreed during interinstitutional negotiations: PE758.182
  • Contribution: COM(2021)0582
AmendmentsDossier
159 2021/0296(COD)
2022/07/18 ECON 159 amendments...
source: 732.672

History

(these mark the time of scraping, not the official date of the change)

links
Research document
links
Research document
docs/4
date
2024-01-24T00:00:00
docs
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2024-01-24T00:00:00
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CSL
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events/4/summary
  • The Committee on Economic and Monetary Affairs adopted the reported by Markus FERBER (EPP, DE) on the proposal for a directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of insurance and reinsurance undertakings and amending Directives 2002/47/EC, 2004/25/EC, 2009/138/EC, (EU) 2017/1132 and Regulations (EU) No 1094/2010 and (EU) No 648/2012.
  • As a reminder, the aim of this proposed directive is to make the insurance and reinsurance sector more resilient and enhance the protection of policyholders, taxpayers, the economy and financial stability within the EU. Moreover, the new directive will provide a framework for cases where the Solvency II regime does not prevent the failure of an insurance undertaking. 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.
  • The committee responsible recommended that the European Parliament's position adopted at first reading under the ordinary legislative procedure should amend the proposal as follows:
  • Scope
  • The amended text reinforces the role of the European Insurance and Occupational Pensions Authority. The EIOPA should be informed of any additional or stricter rules adopted by Member States, other than those laid down in the directive.
  • Resolution plans
  • Members added that the resolution plans should also contain a preliminary assessment of the feasibility and credibility of the winding up under normal insolvency proceedings or of resolution actions. Resolution authorities should draw up resolution plans for each insurance and reinsurance undertaking that is subject to pre-emptive recovery planning requirements provided they assess that the public interest would be positive in the event of a failure or for which a critical function exists. This assessment should be made on the basis of the resolution objectives and criteria such as size, business model, risk profile, interconnectedness, substitutability and cross-border activity .
  • Group resolution plans
  • The amended text suggested that Member States should ensure that group resolution authorities draw up group resolution plans to be activated in case the ultimate parent undertaking or one of the material undertakings within the group risks experiencing a significant deterioration of its
  • financial position.
  • Financial arrangements
  • Financing arrangements should be established in each Member State to compensate policy holders of insurance and reinsurance undertakings authorised in that Member State. While directly absorbing the losses of an insurance company should be avoided, it should be possible to use such financing arrangements to finance other costs associated with the use of resolution tools as a last resort, to the extent necessary to achieve the resolution objectives and insofar as the resolution principles are fully respected. Acknowledging the diversity in insurance markets, Member States should be given some flexibility in relation to the precise arrangements of external financing as long as the availability of sufficient liquidity to guarantee compensation within a reasonable timeframe is ensured. A Member State should impose a contribution obligation only to insurance and reinsurance undertakings authorised in that Member State and to Union branches of a third country undertaking which are established in its territory.
  • Policy-holder protection
  • The report stated that the global financial crisis showed the need for high levels of protection for policy holders. The introduction of insurance guarantee schemes (IGSs) should therefore be advanced. A harmonised framework of national insurance guarantee schemes would help to minimise reliance on public funds by providing equal protection to policy holders and beneficiaries in the event of an insurer’s insolvency. The current lack of homogeneity between national IGSs leads to unequal treatment of policy holders and beneficiaries of to the same insurer, as demonstrated by recent cross-border insurance failures. After sufficient experience in the application of this Directive has been gained, the Commission, after consulting EIOPA, should evaluate and report to the European Parliament and the Council on the possibility of introducing harmonised minimum basic requirements for insurance guarantee schemes in the Union and the steps that would be necessary in order to do so.
  • Review
  • By 1 January 2026, the Commission, after having consulted EIOPA, should submit a report to the European Parliament and to the Council on the application of this Directive.
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  • date: 2022-12-01T00:00:00 title: Vote scheduled in committee
procedure/subject/2.50.03
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procedure/subject/2.50.08
Financial services, financial reporting and auditing
procedure/subject/2.50.10
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Legislative proposal published
body
EC
docs
summary
procedure/subject/2.50.03
Securities and financial markets, stock exchange, CIUTS, investments
procedure/subject/2.50.05
Insurance, pension funds
procedure/subject/2.50.08
Financial services, financial reporting and auditing
procedure/subject/2.50.10
Financial supervision
committees/0/shadows/5
name
MACMANUS Chris
group
The Left group in the European Parliament - GUE/NGL
abbr
GUE/NGL
docs/1
date
2022-01-04T00:00:00
docs
url: http://www.connefof.europarl.europa.eu/connefof/app/exp/COM(2021)0582 title: COM(2021)0582
type
Contribution
body
SE_PARLIAMENT
committees/0/shadows/2
name
HAHN Henrike
group
Group of the Greens/European Free Alliance
abbr
Verts/ALE
committees/1/opinion
False
committees/0
type
Responsible Committee
body
EP
committee_full
Economic and Monetary Affairs
committee
ECON
associated
False
rapporteur
name: FERBER Markus date: 2021-10-25T00:00:00 group: Group of European People's Party abbr: EPP
shadows
committees/0
type
Responsible Committee
body
EP
committee_full
Economic and Monetary Affairs
committee
ECON
associated
False
rapporteur
name: FERBER Markus date: 2021-10-25T00:00:00 group: Group of European People's Party abbr: EPP
shadows
events
  • date: 2021-11-22T00:00:00 type: Committee referral announced in Parliament, 1st reading body: EP
procedure/dossier_of_the_committee
  • ECON/9/07222
procedure/stage_reached
Old
Preparatory phase in Parliament
New
Awaiting committee decision
procedure/Legislative priorities
  • title: Joint Declaration 2021 url: https://oeil.secure.europarl.europa.eu/oeil/popups/thematicnote.do?id=2066000&l=en
committees/0/shadows/0
name
LALUCQ Aurore
group
Group of Progressive Alliance of Socialists and Democrats
abbr
S&D
committees/0/shadows
  • name: ZANNI Marco group: Identity and Democracy abbr: ID
committees/0/rapporteur
  • name: FERBER Markus date: 2021-10-25T00:00:00 group: Group of European People's Party abbr: EPP
commission
  • body: EC dg: Financial Stability, Financial Services and Capital Markets Union commissioner: MCGUINNESS Mairead
docs/0/docs/0
url
https://eur-lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!DocNumber&lg=EN&type_doc=COMfinal&an_doc=2021&nu_doc=0582
title
EUR-Lex
docs/0/summary
  • PURPOSE: to establish a European framework for the recovery and resolution of insurance and reinsurance undertakings.
  • PROPOSED ACT: Directive of the European Parliament and of the Council.
  • ROLE OF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council.
  • BACKGROUND: insurance policies form an integral part of the daily life of European citizens. For many social and economic activities, holding an insurance policy is necessary to protect against potential risks. They also include savings products, which will determine the long-term welfare of their holders. The disorderly failure of insurers can therefore have a significant impact on policy holders, beneficiaries, injured parties or affected businesses. The management of a near-failure or the failure of certain insurers, particularly large cross-border groups, or the simultaneous failure of multiple insurers can also lead to or amplify financial instability.
  • Although Directive 2009/138/EC (Solvency II Directive) of the European Parliament and of the Council aimed at strengthening the financial system in the EU and the resilience of insurance and reinsurance undertakings, it did not completely eliminate the possibility of failures of such insurance and reinsurance undertakings.
  • Moreover, there are currently no harmonised procedures at European level for resolving insurers . This results in considerable substantive and procedural differences between the laws, regulations and administrative provisions that govern the failure of insurers in the Member States. A regime is therefore needed to provide authorities with a credible set of resolution tools to intervene sufficiently early and quickly if insurers are failing or likely to fail to ensure a better outcome for policy holders, while minimising the impact on the economy, the financial system and any recourse to taxpayers’ money.
  • CONTENT: the proposed Directive seeks to harmonise national laws on recovery and resolution of insurers or introduces such a framework if there is none yet, to the extent necessary to ensure that Member States have the same tools and procedures to address failures. The harmonised framework would also safeguard the interests of policy holders and preserve the real economy. It would contribute to financial stability and trust in the internal market for insurance and reinsurance.
  • The proposal addresses crisis management and provides for a comprehensive package of measures including, inter alia , the following elements:
  • Prevention and preparedness
  • The proposal requires insurance and reinsurance undertakings established in the EU and subject to the ‘Solvency II’ regulatory framework to develop preventive recovery plans, in order to be better prepared for a possible crisis and to be able to take prompt remedial action if a crisis occurs.
  • Set-up of resolution authorities
  • This proposal requires Member States to set up insurance resolution authorities , equipped with a minimum harmonised set of powers to undertake all the relevant preparatory and resolution actions. The proposal does not specify the particular authority that should be appointed and can therefore be for example national central banks, competent ministries, public administrative authorities or other authorities entrusted with public administrative powers.
  • Resolution tools
  • The framework would provide national authorities with resolution tools to intervene early and quickly enough in the event of failure or risk of failure of insurers. These instruments would maintain insurance cover for policyholders, beneficiaries and injured parties and allocate losses in a fair and predictable manner.
  • Cross-border group resolution
  • To take account of the cross border nature of some insurance groups and create a comprehensive and integrated framework for recovery and resolution actions in the Union, resolution colleges will be established under the leadership of the group resolution authority and with the participation of the European Insurance and Occupational Pensions Authority (EIOPA). The objective of the colleges is to coordinate preparatory and resolution measures among national authorities to ensure optimal solutions at Union level.
  • Changes to the Solvency II Directive
  • This proposal clarifies supervisory authorities’ powers to impose preventive measures to insurers in cases of deteriorating financial positions or breaches of regulatory requirements, to avoid the escalation of the problems at a sufficiently early stage of deterioration.
  • Penalties
  • In order to ensure compliance by insurers, those who effectively control their business and their administrative, management or supervisory body with the obligations deriving from this proposal, Member States should provide for administrative sanctions and other administrative measures which are effective, proportionate and dissuasive. EIOPA should maintain a central database of all administrative sanctions.
  • Implementation
  • The proposal requires Member States to transpose the recovery and resolution rules in their national laws within 18 months from the entry into force of this proposal. National authorities should report to EIOPA on the application of simplified obligations on an annual basis, which EIOPA should in turn disclose.