Insights

On the 8^th January 2025, the directive establishing a framework for the recovery and resolution of insurance and reinsurance undertakings, better known as the Insurance Recovery and Resolution Directive or IRRD, and the amendments to the Solvency II Directive were officially adopted and published as law in the Official Journal of the European Union. Both directives, being the first two directives of 2025, are expected to have an effect on the European insurance market as a whole and will enter into force on the twentieth day following the date of their publication, therefore on the 28^th January 2025.

The IRRD is designed to create a framework for a pre-emptive recovery planning and resolution regime to ensure that insurers and relevant authorities in the European Union are better prepared for situations of significant financial distress and to facilitate early and quick intervention of the authorities, even across borders. It establishes harmonised recovery and resolution tools and procedures, with enhanced cross-border cooperation between national authorities with the intention of creating an anticipatory approach to protect insurance policyholders, minimise the impact on the economy and the financial system and avoid recourse to taxpayers’ money. The European Insurance and Occupational Pensions Authority has been entrusted with drafting various guidelines and technical standards to facilitate the harmonisation of the IRRD across the European Union.

The Solvency II Directive which entered into force in January 2016, is the prudential regime for insurance and reinsurance undertakings in the European Union aimed at making the insurance market more stable while protecting policyholders and beneficiaries. It is built on a three-pillar structure intended to form a coherent approach across the sector covering various aspects ranging from quantitative requirements relating to capital, qualitative requirements including governance and risk management, to supervision of the insurance and reinsurance undertakings. The amendments published through the new directive in early 2025 is projected to supplement and improve certain aspects including proportionality, quality of supervision, reporting, long-term guarantee measures, macro-prudential tools, sustainability risks and group and cross-border supervision.

Member States are required to transpose the IRRD and the amendments to the Solvency II Directive into national law by the 29^th January 2027 and such measures shall apply from the 30^th January 2027.