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REPORT (COM(2021)0582 – C90365/2021 – 2021/0296(COD))

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

A-9-2023-0251

Committee on Economic and Monetary Affairs · Rapporteur: Markus Ferber

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Parliament's amended version of the Commission proposal for a directive setting a framework for the recovery and resolution of insurance and reinsurance undertakings. It lays down rules for pre-emptive recovery plans, resolution plans, resolution tools and powers, and amends several directives and regulations. Member States must designate resolution authorities, require recovery and resolution planning, and give authorities tools including solvent run-off, sale of business, bridge undertaking, asset and liability separation, and write-down or conversion. Resolution applies where an undertaking is failing or likely to fail, no private or supervisory alternative would prevent failure, and action is in the public interest. Shareholders bear first losses and creditors after them. The text sets safeguards for shareholders, creditors and counterparties, rules on valuation, cross-border and third-country cooperation, administrative penalties, and amendments to other Union acts.

Committee position. The Committee on Economic and Monetary Affairs adopts Parliament's position at first reading, amending the Commission proposal to establish a recovery and resolution framework for insurance and reinsurance undertakings, and calls on the Commission to refer the matter back if it substantially amends its proposal.

Key points

  1. The directive covers insurance and reinsurance undertakings, parent undertakings, insurance and mixed financial holding companies, and third-country branches meeting certain conditions.
  2. Member States must designate one or more resolution authorities, ensure their operational independence, and designate a single competent ministry.
  3. Supervisory and resolution authorities may apply simplified obligations to certain undertakings and groups, and EIOPA must report annually on their application.
  4. Insurance and reinsurance undertakings meeting set criteria must draw up and update pre-emptive recovery plans, which supervisory authorities review within six months.
  5. Resolution authorities must draw up resolution plans for undertakings subject to recovery planning where public interest would be positive or a critical function exists, and at least the five riskiest life, non-life and reinsurance undertakings.
  6. Resolution authorities must assess resolvability and may require undertakings to remove impediments, including by changing structure, limiting exposures, divesting assets or restricting business.
  7. Resolution tools are the solvent run-off tool, sale of business tool, bridge undertaking tool, asset and liability separation tool, and write-down or conversion tool.
  8. The write-down or conversion tool must respect the priority of claims: Tier 1 first, then Tier 2, Tier 3 and other eligible liabilities, with insurance claims affected only as a last resort.
  9. Resolution authorities may suspend payment and delivery obligations, restrict enforcement of security interests, suspend termination rights, and temporarily suspend redemption rights of life policy holders.
  10. Resolution colleges, chaired by the group resolution authority, coordinate group resolution planning and schemes, with EIOPA participating without voting rights.
  11. Member States must lay down effective, proportionate and dissuasive administrative penalties, including fines up to 10% of annual turnover for legal persons and EUR 5 000 000 for natural persons.
  12. The directive amends Directives 2002/47/EC, 2004/25/EC, 2007/36/EC, (EU) 2017/1132 and Regulations (EU) No 1094/2010 and (EU) No 648/2012, and requires EIOPA to create a resolution committee.

Who is affected

  • Insurance and reinsurance undertakings established in the Union, which must prepare recovery plans and may be subject to resolution.
  • Parent undertakings, insurance holding companies and mixed financial holding companies, which may be subject to group planning and resolution.
  • Policy holders, beneficiaries and injured parties, whose claims are protected and affected only as a last resort.
  • Shareholders and creditors, who bear losses in order of priority and receive safeguards against worse treatment than in insolvency.
  • Third-country insurance and reinsurance undertakings with Union branches or subsidiaries, subject to recognition and cooperation rules.

Figures and deadlines

  • At least 3%: ratio of gross written premiums or gross technical provisions to the Member State total, triggering recovery planning.
  • At least every two years: frequency for updating pre-emptive recovery plans.
  • Within six months: deadline for supervisory authorities to review pre-emptive recovery plans.
  • Within two months, extendable by one month: deadline for submitting a revised recovery plan after deficiencies are found.
  • Within four months: deadline for undertakings to propose measures to remove impediments to resolvability.
  • Not exceeding 24 months: period for which a purchaser or bridge undertaking may exercise rights without meeting membership criteria.
  • Up to 10% of total annual turnover: maximum administrative fine for a legal person.
  • Up to EUR 5 000 000: maximum administrative fine for a natural person.

Legal basis: Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union.