Insurance Europe has released a report highlighting a number of significant changes needed to the European Commission’s proposal for an Insurance Recovery and Resolution Directive (IRRD) that would make it fit for purpose and avoid subjecting insurers and their policyholders to unnecessarily costly regulatory burdens.
It is important to note that Insurance Europe (the Federation) does not consider there to be a need to develop an extensive recovery and resolution framework for insurers.
Though, should such a framework be adopted, the Federation suggests it should be properly tailored to the insurance sector and must take into consideration the specific characteristics of the EU’s different national markets.
Insurance Europe states that the attain this, the IRRD must ensure the scope reflects national features, current legislation, and legal forms such as conglomerates.
It adds that national authorities should have the flexibility to make exemptions, along with the freedom to make adaptations to resolution tools and powers to cater for national features.
Insurance Europe also notes that the proposal must have a targeted scope for recovery and resolution planning requirements, and must ensure seamless interaction with the Solvency II supervisory ladder of intervention.
Additionally, it must not introduce unnecessary supervisory intervention points, nor should it require the creation of dedicated resolution authorities. On this, the Federation explains that the delegation of resolution procedures to NSAs, or separate departments within NSAs, is a more proportionate approach.
Further, Insurance Europe notes that the development of important aspects of the IRRD should not be left to EIOPA guidelines or regulatory technical standards, and that it should not introduce a requirement for national resolution funding arrangements.
In Insurance Europe’s view, it should be left to member states to decide whether resolution financing arrangements should be introduced and their design. This means avoiding imposing ex-ante funding requirements.
Closing, Insurance Europe’s report states that it is concerned that the costs of the EC’s proposal have not been properly assessed and are likely to outweigh its benefits.
It writes, “The insurance industry considers that an evidence-based cost-benefit analysis is a prerequisite for any legislative proposal and would encourage the EC to undertake a more comprehensive assessment of the costs to allow these to be weighed against the potential benefits.”
