Sittings · Document
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
Committee on Economic and Monetary Affairs · Rapporteur: Markus Ferber
PR_COD_1amCom
Symbols for procedures
* Consultation procedure
*** Consent procedure
***I Ordinary legislative procedure (first reading)
***II Ordinary legislative procedure (second reading)
***III Ordinary legislative procedure (third reading)
(The type of procedure depends on the legal basis proposed by the draft act.)
Amendments to a draft act
Amendments by Parliament set out in two columns
Deletions are indicated in bold italics in the left-hand column. Replacements are indicated in bold italics in both columns. New text is indicated in bold italics in the right-hand column.
The first and second lines of the header of each amendment identify the relevant part of the draft act under consideration. If an amendment pertains to an existing act that the draft act is seeking to amend, the amendment heading includes a third line identifying the existing act and a fourth line identifying the provision in that act that Parliament wishes to amend.
Amendments by Parliament in the form of a consolidated text
New text is highlighted in bold italics. Deletions are indicated using either the ▌symbol or strikeout. Replacements are indicated by highlighting the new text in bold italics and by deleting or striking out the text that has been replaced.
By way of exception, purely technical changes made by the drafting departments in preparing the final text are not highlighted.
DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
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
(COM(2021)0582 – C90365/2021 – 2021/0296(COD))
(Ordinary legislative procedure: first reading)
– having regard to the Commission proposal to Parliament and the Council (COM(2021)0582),
– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90439/2021),
– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,
– having regard to the opinion of the Committee on Legal Affairs on the use of delegated acts,
– after consulting the European Central Bank,
– having regard to the opinion of the European Economic and Social Committee of 23 February 2022,
– having regard to Rule 59 of its Rules of Procedure,
– having regard to the report of the Committee on Economic and Monetary Affairs (A90000/2022),
1. Adopts its position at first reading hereinafter set out;
2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;
3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.
Amendment 1
Proposal for a directive
Recital 4
Text proposed by the Commission
Amendment
(4) Ensuring effective resolution of failing insurance and reinsurance undertakings within the Union is an essential element in the completion of the internal market. The failure of such undertakings has an impact not only on policy holders and possibly the real economy and financial stability of the markets on which those insurance and reinsurance undertakings operate directly, but also on the trust in the internal market for insurance. The completion of the internal market in financial services has reinforced the interplay between the different national financial systems. Insurance and reinsurance undertakings are active on financial markets to manage their investment portfolio and the risks related to their activities. They are interrelated through their derivative operations with the interbank and other financial markets that are, in essence, pan-European. In that context, the inability of Member States to address the failure of an insurance or reinsurance undertaking and resolve it in a way that is predictable and harmonised and would effectively prevent broader systemic damage, can undermine the stability of financial markets and, consequently, the internal market in the field of financial services.
(4) Ensuring effective resolution of failing insurance and reinsurance undertakings within the Union is an essential element in the completion of the internal market. The failure of such undertakings has an impact not only on policy holders and possibly the real economy and financial stability of the markets on which those insurance and reinsurance undertakings operate directly, but also on the trust in the internal market for insurance. The completion of the internal market in financial services has reinforced the interplay between the different national financial systems. Insurance and reinsurance undertakings are active on financial markets to manage their investment portfolio and the risks related to their activities. In that context, the inability of Member States to address the failure of an insurance or reinsurance undertaking and resolve it in a way that is predictable and harmonised and would effectively prevent broader systemic damage, can undermine the stability of financial markets and, consequently, the internal market in the field of financial services.
Or. en
Amendment 2
Proposal for a directive
Recital 13
Text proposed by the Commission
Amendment
(13) It is necessary to ensure the suitability and effectiveness of the recovery and resolution framework while avoiding unnecessary administrative burdens and costs on undertakings and authorities. The implementation of such recovery and resolution framework should therefore be proportionate to the nature, scale and complexity of the undertaking concerned, and of its activities and services. Regarding the scope of the recovery and resolution planning requirements, authorities should determine, on the basis of a harmonised set of risk-based criteria, which undertakings are subject to the planning requirements. To foster trust in the insurance and reinsurance single market and to foster a level playing field, a minimum degree of preparedness should be achieved through laying down a minimum market coverage level. That minimum market coverage level should however take into account the differences between recovery on the one hand and resolution on the other, and the existence or absence of a public interest for taking resolution action.
(13) It is necessary to ensure the suitability and effectiveness of the recovery and resolution framework while avoiding unnecessary administrative burdens and costs on undertakings and authorities. The implementation of such recovery and resolution framework should therefore be proportionate to the nature, scale and complexity of the undertaking concerned, and of its activities and services. Regarding the scope of the recovery and resolution planning requirements, authorities should determine, on the basis of a harmonised set of risk-based criteria, which undertakings are subject to the planning requirements. Low-risk profile undertakings as defined in Directive 2009/138/EC should be automatically exempt from the requirements of recovery and resolution planning.
Or. en
Amendment 3
Proposal for a directive
Recital 15
Text proposed by the Commission
Amendment
(15) For an orderly resolution process, and to avoid conflicts of interest, Member States should appoint public administrative authorities or authorities entrusted with public administrative powers to perform the functions and tasks in relation to the recovery and resolution framework. Member States should ensure that adequate resources are allocated to those resolution authorities. Where a Member State designates a resolution authority that has other functions, adequate structural arrangements should be put in place to separate those functions from the functions related to resolution and to ensure operational independence. Such separation should not prevent the resolution function from having access to any information it requires for the exercise of its duties under the recovery and resolution framework, or for cooperation between different authorities involved in the application of the recovery and resolution framework.
(15) For an orderly resolution process, and to avoid conflicts of interest, Member States should delegate the resolution powers referred to in this Directive to the relevant insurance supervisory authorities.
Or. en
Amendment 4
Proposal for a directive
Recital 20
Text proposed by the Commission
Amendment
(20) Resolution planning is an essential component of effective resolution. Resolution authorities should therefore have all the information necessary to identify critical functions and ensure their continuation. Insurance and reinsurance undertakings have privileged knowledge of their own functioning and any problems arising from it, and resolution authorities should therefore draw up resolution plans on the basis of, inter alia, the information provided by the undertakings concerned. In order to avoid unnecessary administrative burdens, resolution authorities should primarily retrieve the necessary information from the supervisory authorities.
(20) Resolution planning is an essential component of effective resolution. Supervisory authorities should therefore have all the information necessary to identify critical functions and ensure their continuation. Insurance and reinsurance undertakings have privileged knowledge of their own functioning and any problems arising from it, and supervisory authorities should therefore draw up resolution plans on the basis of, inter alia, the information provided by the undertakings concerned.
(This amendment applies throughout the text. Adopting it will necessitate corresponding changes throughout.)
Or. en
Justification
The creation of additional administrative bodies should be avoided, in particular as in practice these authorities are often identical. Duplication of competences would lead to conflicts and confusion.
Amendment 5
Proposal for a directive
Title I – title
Text proposed by the Commission
Amendment
SUBJECT MATTER AND SCOPE, DEFINITIONS AND DESIGNATION OF RESOLUTION AUTHORITIES
SUBJECT MATTER, SCOPE AND DEFINITIONS
Or. en
Amendment 6
Proposal for a directive
Article 1 – paragraph 2 – subparagraph 1 a (new)
Text proposed by the Commission
Amendment
Member States may provide for exemptions from the provisions of this Directive for undertakings that offer contracts within the meaning of Title II, Chapter II, Section 5, of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), provided it is ensured that the objectives of this Directive are still adequately met and, in particular, that the continuity of insurance relationships is guaranteed in the event of a failure of an undertaking within the meaning of paragraph 1 of this Article. For this purpose, Member States may, inter alia, require the establishment, maintenance or modification of a national protection scheme.
Or. en
Justification
Allows for an appropriate treatment of health insurance schemes that are used as an alternative to social security. Amendment to be read in conjunction with new Article 33a.
Amendment 7
Proposal for a directive
Article 2 – paragraph 2 – point 7
Text proposed by the Commission
Amendment
(7) ‘resolution authority’ means an authority designated by a Member State in accordance with Article 3;
deleted
Or. en
Justification
The creation of additional administrative bodies should be avoided, in particular as in practice these authorities are often identical. Duplication of competences would lead to conflicts and confusion
Amendment 8
Proposal for a directive
Article 2 – paragraph 2 – point 27
Text proposed by the Commission
Amendment
(27) ‘group resolution authority’ means the resolution authority in the Member State in which the group supervisor is situated;
(27) ‘group supervisory authority’ means the supervisory authority in the Member State in which the group supervisor is situated;
(This amendment applies throughout the text. Adopting it will necessitate corresponding changes throughout.)
Or. en
Justification
The creation of additional administrative bodies should be avoided, in particular as in practice these authorities are often identical. Duplication of competences would lead to conflicts and confusion.
Amendment 9
Proposal for a directive
Article 2 – paragraph 2 – point 80
Text proposed by the Commission
Amendment
(80) ‘low risk profile undertaking’ means a low risk profile undertaking as defined in Article 13, point (10a), of Directive 2009/138/EC;
(80) ‘low-risk profile undertaking’ means a low-risk profile undertaking as defined in Article 13, point (10a), of Directive 2009/138/EC;
(This amendment applies throughout the text. Adopting it will necessitate corresponding changes throughout.)
Or. en
Justification
This change is to align the exact spelling of the two legislative proposals that have been presented as a package.
Amendment 10
Proposal for a directive
Article 3
Text proposed by the Commission
Amendment
[...]
deleted
Or. en
Justification
The creation of additional administrative bodies should be avoided, in particular as in practice these authorities are often identical. Duplication of competences would lead to conflicts and confusion.
Amendment 11
Proposal for a directive
Article 4 – paragraph 1 – point a
Text proposed by the Commission
Amendment
(a) the contents and details of pre-emptive recovery and resolution plans provided for in Articles 5 to 7;
(a) the contents and details of pre-emptive recovery plans provided for in Articles 5 to 8 and resolution plans provided for in Articles 9 to 12;
Or. en
Justification
As the Article refers to both recovery and resolution plans, the Articles in Section 3 covering resolution planning should be mentioned as well.
Amendment 12
Proposal for a directive
Article 4 – paragraph 1 – point c
Text proposed by the Commission
Amendment
(c) the content and level of detail of the information required from undertakings pursuant to Article 5(6), Article 10(2) and Article 12(1);
(c) the content and level of detail of the information required from undertakings pursuant to Article 5(7), Article 10(2) and Article 12(1);
Or. en
Justification
Editorial adjustment. Reference in Commission proposal is incorrect.
Amendment 13
Proposal for a directive
Article 4 – paragraph 1 a (new)
Text proposed by the Commission
Amendment
1a. The simplified obligations shall automatically be applied to low-risk profile undertakings.
Or. en
Justification
In the spirit of proportionality, low-risk undertakings should automatically benefit from the set of simplified obligations.
Amendment 14
Proposal for a directive
Article 5 – paragraph 1 – introductory part
Text proposed by the Commission
Amendment
1. Member States shall ensure that insurance and reinsurance undertakings that are not part of a group subject to pre-emptive recovery planning pursuant to Article 7 and that meet the criteria laid down in paragraphs 2 or 3, draw up and keep updated a pre-emptive recovery plan. Such pre-emptive recovery plan shall contain measures to be taken by the undertaking concerned to restore its financial position where that position has significantly deteriorated.
1. Member States shall ensure that insurance and reinsurance undertakings that are not part of a group subject to pre-emptive recovery planning pursuant to Article 7 and that meet the criteria laid down in paragraphs 2 or 3, draw up and keep updated a pre-emptive recovery plan. Such pre-emptive recovery plan shall contain measures to be taken by the undertaking concerned to restore its financial position where that position has significantly deteriorated. A significant deterioration in the financial position is considered to have occurred if the eligible funds fail to cover the Solvency Capital Requirement as laid down in Title I, Chapter VI, Section 4, of Directive 2009/138/EC [Solvency II].
Or. en
Amendment 15
Proposal for a directive
Article 5 – paragraph 2 – subparagraph 1
Text proposed by the Commission
Amendment
Supervisory authorities shall ensure that at least 80% of the Member State’s life and non-life and reinsurance market respectively, where the non-life market share is based on gross written premiums and the life market share is based on gross technical provisions, shall be subject to pre-emptive recovery planning requirements pursuant to this Article.
deleted
Or. en
Justification
An arbitrary market coverage criterion of 80% does not correspond to the idea of a risk-based approach.
Amendment 16
Proposal for a directive
Article 5 – paragraph 2 – subparagraph 2
Text proposed by the Commission
Amendment
In the calculation of the market coverage level referred to in subparagraph 2, the subsidiary insurance or reinsurance undertakings of a group may be taken into account where those subsidiary insurance or reinsurance undertakings are part of a group for which the ultimate parent undertaking is drawing up and maintaining a group pre-emptive recovery plan referred to in Article 7.
deleted
Or. en
Justification
An arbitrary market coverage criterion of 80% does not correspond to the idea of a risk-based approach.
Amendment 17
Proposal for a directive
Article 5 – paragraph 3 – subparagraph 1
Text proposed by the Commission
Amendment
Low risk profile undertakings, however, shall not be subject to pre-emptive recovery planning requirements on an individual basis.
Low-risk profile undertakings shall not be subject to pre-emptive recovery planning requirements.
Or. en
Amendment 18
Proposal for a directive
Article 5 – paragraph 5
Text proposed by the Commission
Amendment
5. Supervisory authorities shall ensure that insurance and reinsurance undertakings update their pre-emptive recovery plans at least annually and after a change to the legal or organisational structure of the undertaking concerned, or to its business or its financial situation, which could have a material effect on, or necessitates a material change to, the pre-emptive recovery plan.
5. Supervisory authorities shall ensure that insurance and reinsurance undertakings update their pre-emptive recovery plans at least every two years and after a change to the legal or organisational structure of the undertaking concerned, or to its business or its financial situation, which could have a material effect on, or necessitates a material change to, the pre-emptive recovery plan.
Or. en
Amendment 19
Proposal for a directive
Article 5 – paragraph 7 – point c
Text proposed by the Commission
Amendment
(c) a framework of indicators referred to in paragraph 8;
(c) a framework of indicators referred to in paragraph 9;
Or. en
Justification
Editorial correction: reference in Commission proposal is incorrect.
Amendment 20
Proposal for a directive
Article 5 – paragraph 8
Text proposed by the Commission
Amendment
8. Member States shall require that insurance and reinsurance undertakings as referred to in paragraph 1 assess the credibility and feasibility of pre-emptive recovery plans, in particular the framework of indicators referred to in paragraph 8 and the remedial actions, against a range of scenarios of severe macroeconomic and financial stress relevant to the insurance or reinsurance undertaking’s specific conditions, including system-wide events, idiosyncratic stress events likely to materially affect their asset and liability profile, and combinations of such stress events.
8. Member States shall require that insurance and reinsurance undertakings as referred to in paragraph 1 assess the credibility and feasibility of pre-emptive recovery plans, in particular the framework of indicators referred to in paragraph 9 and the remedial actions, against a range of scenarios of severe macroeconomic and financial stress relevant to the insurance or reinsurance undertaking’s specific conditions, including system-wide events, idiosyncratic stress events likely to materially affect their asset and liability profile, and combinations of such stress events.
Or. en
Justification
Editorial correction: reference in Commission proposal is incorrect.
Amendment 21
Proposal for a directive
Article 5 – paragraph 11
Text proposed by the Commission
Amendment
11. EIOPA shall, by [PO – add 18 months after entry into force], issue guidelines in accordance with Article 16 of Regulation (EU) No 1094/2010 to specify further the minimum list of qualitative and quantitative indicators referred to in paragraph 7, first subparagraph, point (c) and, in cooperation with the European Systemic Risk Board (ESRB), the range of scenarios referred to in paragraph 8.
deleted
Or. en
Amendment 22
Proposal for a directive
Article 5 – paragraph 12 – introductory part
Text proposed by the Commission
Amendment
12. EIOPA shall develop draft regulatory technical standards further specifying, without prejudice to Article 4, the information that an insurance or reinsurance undertaking as referred to in paragraph 1 is to include in the pre-emptive recovery plan, including the remedial actions referred to in paragraph 7, first subparagraph, point (e) and their implementation.
12. EIOPA shall develop draft regulatory technical standards further specifying, without prejudice to Article 4, the information that an insurance or reinsurance undertaking as referred to in paragraph 1 of this Article is to include in the pre-emptive recovery plan, including the remedial actions referred to in paragraph 7, first subparagraph, point (e), of this Article and their implementation. EIOPA shall also develop draft regulatory technical standards to specify further the minimum list of qualitative and quantitative indicators referred to in paragraph 7, first subparagraph, point (c), of this Article and, in cooperation with the European Systemic Risk Board (ESRB), the range of scenarios referred to in paragraph 8 of this Article.
Or. en
Justification
The list of qualitative and quantitative indicators should be established via an RTS, not via guidelines.
Amendment 23
Proposal for a directive
Article 9 – paragraph 2 – subparagraph 1
Text proposed by the Commission
Amendment
Resolution authorities shall ensure that at least 70% of the Member State’s life and non-life and reinsurance market respectively, where the non-life market share is based on gross written premiums and the life market share is based on gross technical provisions, shall be subject to resolution planning. In the calculation of the market coverage level, the subsidiaries of a group may be taken into account where those subsidiaries are covered in the group resolution plan referred to in Article 10.
deleted
Or. en
Justification
Arbitrary market coverage criteria do not correspond to the notion of a risk-based approach.
Amendment 24
Proposal for a directive
Article 9 – paragraph 2 – subparagraph 2
Text proposed by the Commission
Amendment
Low risk profile undertakings shall not be subject to resolution planning requirements on an individual basis.
Low-risk profile undertakings shall not be subject to resolution planning requirements.
Or. en
Amendment 25
Proposal for a directive
Article 9 – paragraph 4 – subparagraph 1
Text proposed by the Commission
Amendment
Resolution plans shall not assume any extraordinary public financial support besides, where available, the use of insurance guarantee schemes or of any financing arrangements.
Resolution plans shall not assume any extraordinary public financial support or the use of any financing arrangements.
Or. en
Amendment 26
Proposal for a directive
Article 9 – paragraph 8 – introductory part
Text proposed by the Commission
Amendment
8. EIOPA shall develop draft regulatory technical standards further specifying, without prejudice to Article 4, the contents of the resolution plan.
8. EIOPA shall develop draft regulatory technical standards further specifying, without prejudice to Article 4, the contents of the resolution plan and the criteria for the identification of critical functions.
Or. en
Amendment 27
Proposal for a directive
Article 9 – paragraph 9
Text proposed by the Commission
Amendment
9. EIOPA shall, by [PO – add 18 months after entry into force], issue guidelines in accordance with Article 16 of Regulation (EU) No 1094/2010 to specify further criteria for the identification of critical functions.
deleted
Or. en
Justification
The identification of "critical functions" should be done via an RTS, not via guidelines.
Amendment 28
Proposal for a directive
Article 21 – paragraph 1
Text proposed by the Commission
Amendment
Member States shall ensure that insurance or reinsurance undertakings that meet the conditions laid down in Article 19(1), points (a) and (b), but not the condition laid down in Article 19(1), point (c), and that meet the Minimum Capital Requirement laid down in Title I, Chapter VI, Section 5, of Directive 2009/138/EC, are wound up in an orderly manner in accordance with normal insolvency proceedings which ensure an orderly exit from the market.
Member States shall ensure that insurance or reinsurance undertakings that meet the conditions laid down in Article 19(1), points (a) and (b), but not the condition laid down in Article 19(1), point (c), are wound up in an orderly manner in accordance with normal insolvency proceedings which ensure an orderly exit from the market.
Or. en
Amendment 29
Proposal for a directive
Article 27 – paragraph 1
Text proposed by the Commission
Amendment
1. Member States shall ensure that resolution authorities have the power to withdraw the authorisation of the undertaking under resolution to write new insurance or reinsurance contracts and place the undertaking under resolution in a solvent run-off procedure to terminate the activities of that undertaking.
1. Member States shall ensure that supervisory authorities have the power to withdraw the authorisation of the undertaking under resolution to write new insurance or reinsurance contracts and place the undertaking under resolution in a solvent run-off procedure to terminate the activities of that undertaking.
Or. en
Amendment 30
Proposal for a directive
Article 33 a (new)
Text proposed by the Commission
Amendment
Article 33a
Transfer to Existing National Protection Schemes
Instead of applying the provisions of Articles 32 and 33 of this Directive, Member States may, while ensuring the interests of policy holders, provide for a transfer of portfolios to an appropriate national protection scheme, while ensuring continuity of insurance relationships, for undertakings that offer contracts within the meaning of Title II, Chapter II, Section 5, of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). Member States may require the establishment, maintenance or modification of an appropriate national protection scheme for that purpose.
Or. en
Justification
Allows for an appropriate treatment of health insurance schemes that are used as an alternative to social security and their existing protection schemes.
Amendment 31
Proposal for a directive
Article 34 – paragraph 1 – point b – introductory part
Text proposed by the Commission
Amendment
(b) to convert to equity or reduce the principal amount of claims, including insurance claims, or debt instruments that are transferred:
(b) to convert to equity or reduce the principal amount of claims, excluding insurance and reinsurance claims, or debt instruments that are transferred:
Or. en
Justification
Policyholders should be protected against supervisory decisions to impose a write-down.
Amendment 32
Proposal for a directive
Article 40 – paragraph 1 – point f
Text proposed by the Commission
Amendment
(f) the power to restructure insurance claims or reduce, including to reduce to zero, the principal amount of or outstanding amount due in respect of debt instruments and eligible liabilities, including insurance claims, of an undertaking under resolution;
(f) the power to restructure claims, excluding insurance and reinsurance claims, or reduce, including to reduce to zero, the principal amount of or outstanding amount due in respect of debt instruments and eligible liabilities, excluding insurance and reinsurance claims, of an undertaking under resolution;
Or. en
Justification
Consistent amendment with the rapporteur's proposed amendment to Article 34 (1)(b) to exclude insurance and reinsurance claims from the write-down or conversion tool.
Amendment 33
Proposal for a directive
Article 41 – paragraph 1 – point g
Text proposed by the Commission
Amendment
(g) transfer any reinsurance rights covering transferred insurance claims without the consent of the reinsurance undertaking where the resolution authority transfers assets and liabilities of the undertaking under resolution in whole or in part to another entity.
(g) transfer any reinsurance rights covering transferred insurance claims without the consent of the reinsurance undertaking where the resolution authority transfers assets and liabilities related to those reinsurance rights of the undertaking under resolution in whole or in part to another entity.
Or. en
Justification
Clarification that this concerns assets and liabilities related to the reinsurance contract, not just any assets and liabilities.
Amendment 34
Proposal for a directive
Title VII – title
Text proposed by the Commission
Amendment
AMENDMENTS TO DIRECTIVES 2002/47/EC, 2004/25/EC, 2009/138/EC, (EU) 2017/1132 AND TO REGULATIONS (EU) No 1094/2010 AND (EU) No 648/2012
AMENDMENTS TO DIRECTIVES 2002/47/EC, 2004/25/EC, 2007/36/EC, (EU) 2017/1132 AND TO REGULATIONS (EU) No 1094/2010 AND (EU) No 648/2012
Or. en
Justification
Shareholder Rights Directive is missing, Solvency II should not be changed.
Amendment 35
Proposal for a directive
Article 83
Directive 2009/138/EU
Article 141
Text proposed by the Commission
Amendment
[...]
deleted
Or. en
Justification
Solvency II should not be changed via this directive.
Amendment 36
Proposal for a directive
Article 91 a (new)
Text proposed by the Commission
Amendment
Article 91a
Insurance Guarantee Schemes
By 1 January 2024, the Commission, after having consulted EIOPA, shall submit a report to the European Parliament and to the Council outlining the necessary steps to introduce minimum common standards for insurance guarantee schemes within the European Union. That report shall at least:
- assess the state of play of insurance guarantee schemes in Member States (coverage level, types of insurances covered, triggers);
- discuss policy options;
- outline the necessary steps to introduce a minimum baseline for insurance guarantee schemes across the Union;
- analyse the corresponding necessary changes to other legislative acts.
The report shall be accompanied by a legislative proposal where appropriate.
Or. en
Justification
The Insurance Recovery and Resolution regime is not credible without a minimum level of harmonisation of insurance guarantee schemes.
EXPLANATORY STATEMENT
Background
The European Commission put forward the proposal for a framework for the recovery and resolution of insurance and reinsurance undertakings against the background of the global financial crisis of 2008, which exposed vulnerabilities of the financial sector and its interconnectedness. As one of the reactions to this financial crisis the Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms was adopted for the banking sector and entered into force as of 2015 as part of the Banking Union.
Following the ‘Key Attributes on effective Resolution Regimes for Financial Institutions’ of 2014 and the Insurance Core principles developed by the IAIS the Commission now proposes a framework of rules for recovery and resolution also for the insurance sector. The Commission posits that while insurance and reinsurance undertakings operate cross border, there is a lack of coordination and cooperation between the competent public authorities in distress scenarios. At the same time, there are no harmonised European rules to resolve insurance or reinsurance undertakings.
Draft report
While the rapporteur shares the assessment that rules should be available to manage the failure of cross-border insurance or reinsurance undertakings, he takes the view that the proposed framework raises a number of questions that have not been answered yet. First and foremost, there are questions how useful recovery and resolution tools can be in the absence of harmonised rules for insurance guarantee schemes. Furthermore, there are questions if the suggested rules are really a good fit for the insurance sector, which is materially different from the banking sector where many of the IRRD provisions seem to originate from. The rapporteur is prepared to enter into a discussion with Members of Parliament, the European Commission and Member States to find an appropriate solution based on the characteristics of the insurance and reinsurance market. Such a solution should into account the specificities of the insurance business as well as the respective risk emanating from an insurance or reinsurance undertaking.
Resolution authority
The proposal requires Member States to designate specific resolution authorities to play an important role in recovery planning and the entire resolution procedure. The rapporteur is in doubt whether the introduction of another dedicated administrative authority exclusively for recovery and resolution in addition to the existing national supervisory authorities would indeed be helpful. With a view to a streamlined process in a situation of financial distress, there seem to be advantages to rely on established authorities, which, by their supervisory experience, are familiar with the economic conditions of the insurance market and the respective undertaking. Keeping one central competent authority would avoid conflicts of competence and would thus ensure an efficient process. Moreover, supervisory authorities would be best placed to ensure a frictionless application of both, recovery and resolution instruments and the toolkit provided by Solvency II.
Market coverage
The suggested scope of at least 80% of the Member State’s life and non-life and reinsurance market being subject to pre-emptive recovery planning (Article 5(2)) and at least 70% of the Member State’s life and non-life and reinsurance market being subject to resolution planning (Article 9 (2)) raises concerns. Both thresholds seem arbitrary, very high and would include considerably more undertakings than just the large insurance and reinsurance undertakings with cross-border business that could actually pose a risk for the entire financial sector. The rapporteur takes the view that resolution planning should be first and foremost risk-based and suggests not to use a threshold system.
Following the risk-based approach, low-risk undertakings should be granted a more generous approach. Based on the designation procedure in Solvency II, they should be automatically exempted from pre-emptive recovery and resolution planning. The case-by-case assessment proposed by the European Commission does not reflect the potential risk these undertakings may pose.
Supervisory powers
The rapporteur is of the opinion that, since the present proposal has been put forward in a package together with the proposal to review the Solvency II Directive, the inherent commonalities of both sets of rules for the insurance sector should be duly taken into account. It is thus surprising that the IRRD proposal seems to deviate in certain aspects from established principles of insurance supervision. In a situation of turmoil and financial distress, there is no obvious reason why established criteria, such as the Solvency Capital requirement (SCR) and the Minimum Capital Requirement (MCR) as defined in Solvency II should not be relied upon as key triggers for recovery and resolution action. Both thresholds are conservatively calibrated and would leave sufficient room for intervention if necessary. The rapporteur argues to establish a coherent system based on well-practiced principles.
Insurance claims
The write-down and conversion tool as one of the proposed resolution tools provides for the possibility to convert into equity, cancel, reduce or restructure the amount of insurance claims (Articles 34, 40, 41). The administrative authority competent to apply the resolution tools thereby would be granted the power to modify the rights policyholders and insurance undertakings agreed upon in the insurance contract. Under normal insolvency rules such competence on contractual rights lie with the competent courts but not with the administration or the supervisor. The rapporteur hence suggests to stick to this principle and exclude insurance and reinsurance claims from the write-down and conversion tool.
Insurance guarantee schemes (IGS)
Given the concerns the proposed framework for the recovery and resolution of insurance and reinsurance undertakings raises, it might be worthwhile to consider alternative or complementary approaches. Some Member States have insurance guarantee schemes available to protect policyholders from losses. The proposal refers to the existing schemes, however, in rather few cases and only in relation to their ability to provide funds to cover policyholders’ losses. The rapporteur takes the view that this existing national structure should be used as a starting point and suggests to consider developing minimum harmonisation standards instead of setting up an entirely new system. In this regard, it could be debated to mandate the European Commission and EIOPA, based on its previous work and its recent call for a Europe-wide insurance guarantee scheme to develop such principles.
In summary: The rapporteur welcomes the attempt to enhance policyholder protection and take precautionary steps for crisis situations. A number of aspects in the present proposal however, seem to be taken over from the banking sector without due regard to the specifics of insurance markets, establish additional administrative burden and do not sufficiently build upon already successfully practised structures. An appropriate solution should be focused on the insurance market and tailored to the specificities and the complexity of the insurance and reinsurance business.