Preparing for Insurance Recovery and Resolution: A More Structured Endgame for EU Insurers

The regulatory landscape for EU insurers is evolving, with far greater emphasis on how firms prepare for and respond to stress and how they exit the market if it comes to that. The introduction of the EU Insurance Recovery and Resolution Directive (IRRD), alongside the UK's developing approach to solvent exit planning, signals a shift toward more structured, transparent and policyholder-focused outcomes.

While these frameworks differ slightly in detail, they share a common objective: ensuring that insurers aren't only resilient in steady-state conditions, but also capable of managing severe stress and, where necessary, executing an orderly and controlled exit. For firms operating across multiple jurisdictions, beyond the EU and the UK, this creates both a compliance challenge and a strategic opportunity.

Our experience working with the Irish and UK regimes provides insight into how firms might wish to respond to the pan-EU regime now being implemented.

From Solvency II to IRRD: A natural evolution

Recovery and resolution planning in insurance has developed more gradually than in banking. Under Solvency II rules, firms are required to maintain strong governance, risk management and forward-looking assessments such as the ORSA. However, those frameworks stopped short of introducing a fully harmonised approach to recovery and resolution.

The IRRD represents a significant step forward, establishing a consistent EU-wide framework for pre-emptive recovery planning and resolution preparedness. It formalises expectations around recovery plans, introduces a clearer distinction between firm-led recovery and authority-led resolution and enhances supervisory coordination across Member States, whilst leaving responsibility for overseeing implementation and managing failing (re)insurers with national resolution authorities.

For firms that have operated under the jurisdiction of the Irish regulator, the Central Bank of Ireland or in the UK, the Prudential Regulation Authority, this won't feel entirely new. But for those elsewhere in the EU, there are new regulations coming in January 2027, bringing greater structure, consistency and regulatory scrutiny.

Drawing on our experience in both the Irish and UK markets, this article takes a look at what firms elsewhere in the EU can expect from "Directive (EU) 2025/1 of the European Parliament and of the Council,"¹ the framework establishing recovery and resolution planning requirements for insurance and reinsurance undertakings across EU member states.

A leading indicator: The Irish experience

Whilst several EU jurisdictions have previously introduced elements of recovery and resolution planning for (re)insurance firms as part of their supervisory expectations, Ireland has been at the forefront of pre-emptive recovery planning.

Regulations introduced by the Central Bank of Ireland in 2021 required firms to maintain structured recovery plans, supported by governance, stress testing and clearly defined recovery options. These plans must be reviewed regularly and updated following a material change, reflecting a proactive supervisory approach.

As a result, Irish (re)insurers are already well advanced ahead of the January 2027 implementation of the EU-wide regulations. For these firms, IRRD is less about starting from first principles and more about enhancing and formalising existing frameworks, as well as identifying any gaps that may exist between their existing plans and the expectations of the new regulations. The real value lies in refining recovery options, strengthening governance, ensuring plans are operationally credible and making any adjustments that may be necessary to align with the EU regulations with wider international standards.

What IRRD means in practice for EU (re)insurers

At its core, IRRD requires (re)insurers — primarily those that fall within the scope of Solvency II, EU insurance holding companies and EU mixed financial holding companies — to take a much more structured approach to financial stress and contingency planning.

Single jurisdiction firms will deal with a single resolution authority. But there are some additional requirements covering the way multi-jurisdictional groups respond, with the group's headquarters typically expected to take the lead and resolution authorities coordinating through resolution colleges, much like supervisory colleges under Solvency II. These multi-jurisdictional groups may additionally have specific tasks and reporting obligations to their Group Resolution Authority that will require work to be undertaken at a territorial level.

Firms will be expected to develop pre-emptive recovery plans that set out credible actions to restore financial strength under stress scenarios. These plans must be supported by robust governance, clearly defined escalation mechanisms and access to reliable data to enable timely decision-making.

In parallel, (re)insurers will need to engage more actively with resolution authorities, providing information to support the development of resolution strategies and ensuring that their operations can support execution if required.

A key feature of the framework is the distinction between recovery and resolution. Recovery remains resolutely firm-led, focused on stabilising the business. Resolution, by contrast, sits with authorities and introduces the concept of a more interventionist dimension where recovery is no longer viable.

This distinction will require firms to think not just about whether recovery actions are available and viable, but also how their business would be managed in more extreme scenarios.

Firms should also be alert to the definition of "critical functions" under IRRD and its relationship to the Digital Operational Resilience Act (DORA). The IRRD rules deal with financial stability and the outward-facing consequences of financial resilience. DORA is focused on the way firms are required to address their inward-facing operational resilience obligations. Firms will need to ensure there is consistency between assumptions made in each, whilst respecting the different objectives of each set of rules.

The list below provides a summary of the actions (re)insurance firms will need to undertake if subject to the new IRRD rules.

EU rules, applied locally

At a central level, the IRRD rules provide clear expectations for the individual Member States to enact along with a timetable for doing so. But how the scope of those rules is determined allows for greater flexibility. The rules require that at least 40% of the Member State's market must be subject to resolution planning and at least 60% of a Member State's market must be covered by recovery plans. Market share is determined using different measures for life and non-life firms. These are minimum figures and Member States can choose to require higher levels of coverage.

Whilst it's expected that a proportionate approach may be taken to the inclusion of captives in Ireland, this isn't guaranteed and other Member States may include captives to meet their own market share thresholds. Beyond market share, additional factors such as critical function performance, public interest, interconnectedness, cross-border activity and group membership may also be used to determine inclusion. Firms will need to determine the applicability of the rules for each territory in which they operate.

Bridging EU and UK expectations

For EU firms that also operate UK-regulated businesses, IRRD will need to be considered alongside the PRA's solvent exit planning framework, including Solvent Exit Analysis and Solvent Exit Execution Plans. If you'd like to understand more about the UK regulatory approach, it's a topic we've covered separately in our article "Solvent Exit Planning: Closing the Door Before the Horse Has Bolted"²

Although the regulatory drivers differ, the underlying themes are closely aligned. Both regimes require firms to:

• Identify credible stress scenarios
• Define governance and escalation pathways
• Ensure operational readiness for execution
• Maintain up-to-date, reviewable plans

Rather than treating these as separate workstreams, firms with EU and UK operations should consider taking a more integrated approach. Aligning EU and UK frameworks early will reduce duplication and ensure consistency in assumptions, stress scenarios and management actions.

This alignment of approach will help ensure differences in timing and regulatory expectations don't create inefficiencies or conflicting approaches.

Avoiding common pitfalls

A consistent message from regulators is that recovery and resolution planning must be practical, credible and embedded within broader risk management frameworks.

In our experience working under the existing Irish resolution and recovery regulations, firms often encounter several common challenges. One of the most persistent is treating recovery planning as a purely compliance-driven exercise. Plans developed in isolation are unlikely to be operationally effective when tested under real stress.

Similarly, over-reliance on generic or theoretical recovery options can undermine credibility. Regulators expect plans to be tailored to the firm's specific business model, with clear evidence that proposed actions are deliverable in practice.

Operational readiness is another critical area. Recovery planning depends heavily on the availability of timely data, robust systems and clear governance arrangements. Without these, even well-articulated plans can prove difficult to execute.

Board engagement remains equally important. Effective recovery and resolution planning requires clear ownership and active oversight, ensuring that decisions can be made quickly and with sufficient authority when required.

A window for initial action

With IRRD scheduled to be fully implemented by January 2027, firms have a window to prepare.

Importantly though, supervisory expectations around the practicalities of implementation are likely to develop ahead of formal deadlines. Firms that move early can shape engagement with regulators, identify gaps in existing frameworks and build internal capability in a more controlled way.

For many organisations, this starts with a gap analysis — assessing current recovery planning against IRRD expectations and identifying areas for enhancement. From there, the focus should shift to embedding those changes within governance, risk and operational processes.

Beyond compliance: A strategic opportunity

While the regulatory imperative is clear, IRRD shouldn't be viewed purely as a compliance exercise. Done effectively, recovery and resolution planning can strengthen resilience, improve decision-making and provide greater strategic clarity.

Firms that invest in credible, well-integrated frameworks are better positioned to respond to stress scenarios, protect policyholders and maintain stakeholder confidence. They are also likely to benefit from more constructive regulatory engagement over time.

In this sense, IRRD represents not just a new set of obligations, but an opportunity to reinforce the fundamentals of sound risk management and governance.

How Artex can help

Navigating the emerging landscape of recovery, resolution and solvent exit planning requires a combination of regulatory insight and practical implementation experience, with firms able to draw on insights from complying with similar regimes such as those in Ireland and the UK for guidance.

Artex provides advisory and implementation support to (re)insurers across Europe and the UK in developing integrated risk and governance frameworks that align with both IRRD (EU) and Solvent Exit Planning (UK) expectations. This includes supporting recovery plan design, governance frameworks, stress testing approaches and operational readiness.

By combining our actuarial, risk and operational implementation experience and expertise, we help ensure that plans are not only compliant, but also practical and executable in real-world scenarios.

If you'd like to discuss any of the issues covered in this article, please speak with the author or your usual Artex contact.