Insurance Europe, the European insurance and reinsurance federation, calls for the European Commission to ‘stop the clock’ on the implementation of the Insurance Recovery and Resolution Directive (IRRD) legislative process.
According to the organisation, this approach “will allow policymakers, EIOPA, and industry stakeholders to conduct a thorough impact assessment of what is truly necessary to protect policyholders and financial stability in relation to failing insurance companies.”
As currently drafted, Insurance Europe’s concern is that the IRRD places an excessive and unnecessary burden on European insurers.
The proposed framework surfaces international benchmarks, introducing requirements that are considerably more intricate and expensive than those in other major jurisdictions.
This situation threatens the competitiveness for EU insurers and contradicts recent European Council conclusions, which call upon the Commission and co-legislators to prioritise and expedite work on initiatives that enhance simplification and competitiveness, Insurance Europe explains.
The key concerns include:
- Disproportionate Requirements: The IRRD’s extensive reporting and planning obligations are not commensurate with the insurance sector’s low systemic risk.
- Limited impact on financial stability: Evidence shows that the insurance sector poses minimal systemic risk, and robust safeguards are ready in place through frameworks like Solvency II.
- Administrative burden and costs: The IRRD’s board scope, aggressive timelines, and overlap with other initiatives risks overburdening insurers and ultimately raising costs for policyholders.
- International Disadvantage: Other jurisdictions have implemented more balanced, risk-based strategies, avoiding arbitrary thresholds and excessive reporting.
Insurance Europe’s proposed ‘stop the clock’ is described as a “practical example of smarter, more proportionate regulation needed to strengthen the EU’s competitiveness.”
Angus Scorgie, Head of Prudential Regulation & International Affairs, stated: “The insurance industry recognises the benefits of being well prepared for situations of severe financial distress.
“Nevertheless, we remain sceptical of the IRRD’s added value because the Solvency II prudential regime already provides extensive safeguards against the risk of a failing insurer which mitigate the need for far-reaching recovery and resolution tools. A stop-the-clock on the IRRD would give a welcome opportunity to simplify and rationalise, ensuring it meets its objectives without disproportionate burdens on European insurers.”
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