knowledge 30 April 2026 |

(Re)Insurers in distress: the EU Insurance Recovery and Resolution Directive

Key takeaways

The Insurance Recovery and Resolution Directive (the “IRRD”)¹ requires Ireland to ensure that certain insurance and reinsurance undertakings:²

1. prepare pre-emptive recovery plans
2. are subject to resolution plans prepared by the resolution authority. While not yet formally confirmed in Irish transposing measures, this will very likely be the Central Bank of Ireland (the “Central Bank”).³

Additionally, an in-scope undertaking should include:

1. a ‘bail-in recognition’ clause in a contract governed by the law of a third-country if the contract relates to a liability that is capable of being subject to the write-down or conversion powers of the resolution authority (discussed below);⁴ and
2.  a ‘resolution stay recognition clause’ in a relevant financial contract governed by the law of a third-country if the contract either creates a new obligation or materially amends an existing obligation after the Irish law implementing the IRRD enters into force or provides for termination rights or rights to enforce security interests that would be subject to stay powers if the contract were governed by the laws of an EU Member State.⁵

On 9 December 2025, the European Insurance and Occupational Pensions Authority (“EIOPA”) published seven consultation papers regarding the IRRD.⁶ Then, on 16 February 2026, EIOPA published six instruments to assist in the operationalisation of the IRRD (discussed below). ⁷

Timing

The IRRD is set to be transposed by Member States by 29 January 2027 and will then apply to in-scope undertakings from 30 January 2027. Noting a lack of clarity regarding key aspects of the IRRD, Insurance Europe has called for, among other things, the IRRD requirements to be phased-in rather than applying from 30 January 2027, mandatory reporting to be scaled back, and a more streamlined approach to the IRRD.  However, the Central Bank has confirmed that full implementation of the IRRD is required by 30 January 2027. ⁸

Who will be in-scope?

The IRRD requires the resolution authority to ensure that at least 40% of Ireland’s life insurance, non-life insurance and reinsurance market is subject to a resolution plan.⁹ The resolution authority will decide which undertakings are subject to a resolution plan in light of the following objectives:

1. protecting the collective interest of policy holders, beneficiaries and claimants;
2. maintaining financial stability, in particular by preventing contagion and by maintaining market discipline;
3. ensuring the continuity of critical functions.¹⁰ Significant impacts include: not writing new business for certain risks, not covering certain risks at all, not paying certain policy holders, beneficiaries, claimants, and not making new investments/loans or immediately selling or calling in investments/loans; ¹¹ and
4. protecting public funds by minimising reliance on extraordinary public financial support (i.e. state aid)

(the “Resolution Objectives”).

The IRRD requires the supervisory authority (again likely the Central Bank) to ensure that at least 60% of Ireland’s life insurance, non-life insurance and reinsurance market is subject to pre-emptive recovery planning requirements. Therefore, the supervisory authority will decide which undertakings (in addition to the undertakings already subject to a resolution plan) must prepare a pre-emptive recovery plan based on the following factors:

“size, business model, risk profile, interconnectedness and substitutability, their importance for the economy of the Member States in which they operate, and their cross-border activities, in particular significant cross-border activities.”¹²

These factors are discussed in the EIOPA final report on the draft Regulatory Technical Standards (“RTS”) on criteria for pre-emptive recovery planning requirements and methods to be used when determining the market shares.¹³

What is a pre-emptive recovery plan?

A pre-emptive recovery plan sets out the actions to be taken by an undertaking to restore its financial position in the event of significant deterioration.¹⁴ It must contain indicators¹⁵ of when remedial action should be considered and/or taken. An in-scope undertaking will be required to submit a pre-emptive recovery plan to the supervisory authority for assessment and determination of whether there are deficiencies in the plan. An in-scope undertaking will also be required to promptly notify the supervisory authority if these indicators are met (even if the undertaking considered and decided that no remedial action should be taken).

EIOPA has published a draft RTS on the content of (group) pre-emptive recovery plans¹⁶ which specifies the minimum content to be included in a pre-emptive recovery plan. This includes a description of the firm or group, governance plan, indicator framework, a range of remedial actions, and a communications strategy. This draft RTS seeks to streamline feasibility by allowing a plan to cross-refer to existing documents and to exclude critical functional analysis from a pre-emptive recovery plan.

The EIOPA notes that a pre-emptive recovery plan:

1. may be informed by the undertaking’s own risk and solvency assessment (“ORSA”) and liquidity risk management plans (“LRMP”) but these plans are different in approach and scope; and
2. should be drafted in a “business-as-usual” environment, whereas to date Solvency II recovery plans are required in case of non-compliance with the solvency capital requirement (“SCR”). It is anticipated that if an undertaking’s SCR is breached, the pre-emptive recovery plan can be the starting point for the Solvency II plan.¹⁷

What is a resolution plan?

A resolution plan is drawn up ex-ante for the undertaking that the resolution authority selects for resolution planning. In-scope undertakings will be selected on risk-based criteria for undertakings that carry a critical function¹⁸ or where there would be a public interest in the event of a failure. A resolution plan is drawn up by the resolution authority and sets out the resolution action¹⁹ which the resolution authority may take in the event that:

1. the undertaking is failing or likely to fail. The management team of the in-scope undertaking will be required to notify the supervisory authority if the undertaking is failing or likely to fail;
2. there is no reasonable prospect that any alternative private sector measures or supervisory action, including preventive and corrective measures, would prevent the failure of the undertaking within a reasonable timeframe; and
3. resolution action is necessary in the public interest i.e. resolution action is necessary for the achievement of and is proportionate to any of the Resolution Objectives (defined above) and the winding-up of the undertaking under normal insolvency proceedings would not meet the Resolution Objectives to the same extent.

EIOPA has published draft RTS on the content of resolution and group resolution plans.²⁰ On 24 April 2026, EIOPA published two final reports setting out its draft implementing technical standards on:

1. resolution reporting under the IRRD.²¹This includes specific procedures and standard forms and templates²² to be given by in-scope insurers to resolution authorities to enable the latter to create resolution plans under the IRRD; and
2. the functioning of resolution colleges and the creation of joint decisions on group resolution plans regarding resolvability.²³

Ongoing review

The pre-emptive recovery plan and resolution plan should be updated at least every 2 years or when a material change (such as changes to the legal or organisational structure of the undertakings, its business, or its financial position) occurs or is foreseeable.

Extensive new regulatory powers

If the resolution authority makes an assessment that “there are substantive impediments to the resolvability of an insurance or reinsurance undertaking”, then it will have extensive powers to address these impediments, including revising agreements, limiting exposures, and restructuring assets or liabilities. EIOPA has published guidelines on:

1. the matters and criteria for the assessment of the resolvability of undertakings or groups;²⁴ and
2. measures to remove impediments to resolvability and the circumstances in which each measure may be applied.²⁵ These guidelines discuss proportionate measures to remove impediments to resolvability and the circumstances in which each may be applied.

Under the IRRD, if an undertaking breaches its minimum capital requirements or is facing insolvency, the resolution authority will be able to apply resolution tools including:

1. prohibiting the formation of new insurance contracts;
2. transferring assets, rights, liabilities, shares, or instruments of ownership to a purchaser (including a legal entity owned by a public authority and specifically created for this purpose); and
3. writing down or converting “capital instruments, debt instruments and other eligible liabilities”, although:
   • this power does not purport to create a power to write down or convert secured liabilities or tax liabilities governed by the law of a jurisdiction that is not that of the resolution authority; and
   • if a shareholder or creditor has incurred greater losses due to the use of write-down or conversion tool than it would have incurred in a winding up under normal insolvency proceedings, the shareholder or creditor is entitled to receive payment of the difference.

Additionally, the resolution authority will have general powers including the power to terminate derivative contracts, replace the management of the undertaking and suspend contractual obligations and policy holders’ rights.

Comparison with the Bank Recovery and Resolution Directive²⁶

Unlike the Bank Recovery and Resolution Directive (the “BRRD”),²⁷ the IRRD does not introduce a minimum requirement for own funds and eligible liabilities (“MREL”). The IRRD’s write-down or conversion tool is calibrated to support solvent run-off and to facilitate transfers rather than to serve as a standalone recapitalisation tool. The IRRD is, however, modelled on the BRRD. Both regimes require in-scope undertakings to ensure their contracts are drafted to recognise the exercise of the resolution authority’s powers. Company groups which include both:

1. undertakings in-scope of the IRRD; and
2. EU banks or qualifying investment undertakings in-scope of the BRRD,

may experience overlap between the relevant plans required by these two regimes.

However, the regimes are not identical. For example, unlike the BRRD, the IRRD does not include a specific power to prevent the removal of management or allow the use of the write-down or conversion tool to enable an in-scope undertaking to continue its business.

How can we help?

We assist insurance and reinsurance undertakings with strategic guidance in relation to satisfying the requirements of IRRD by:

1. updating contracts (in particular, contracts with counterparties outside of the EU which may need to be updated to account for the new powers of Irish regulatory authorities) to ensure compliance with financial regulations;
2. staying up to date with regulatory guidelines, such as publications by EIOPA and the Central Bank. For example, additional draft RTS are expected to be published by EIOPA in July 2026 regarding:
   • methodologies for assessing the value of the assets and liabilities of the insurance and reinsurance undertaking in the context of resolution;
   • separation of resolution valuation and No Creditor Worse Off (“NCWO”) valuation;
   •  the methodology for assessing the treatment that shareholders, policy holders, beneficiaries, claimants, and other creditors, would have received if the undertaking under resolution had entered insolvency proceedings and the methodology for the estimation of the replacement costs; and
   • the methodology for calculating the buffer for additional losses to be included in provisional valuations; and
      
3. communicating with the relevant regulatory authorities in Ireland.