Insurance Recovery and Resolution Directive (IRRD): redefining stability and crisis readiness in European insurance

The introduction of IRRD is a turning point that marks a structural change in insurance supervision and the way continuity of relationships with policyholders and essential services is preserved even under severe conditions.

While many companies might still consider the IRRD a topic for the future, technical development is already well underway. In 2025, the supervisory authority European Insurance and Occupational Pensions Authority (EIOPA) published consultations covering recovery and resolution plans, resolvability, critical functions, impediments, reporting requirements and resolution colleges. The architecture of these systems are being developed now to not only aid in national implementation but to create operational blueprints that will guide authorities and firms through stressed scenarios.

The directive was created to bring the framework of the insurance sector closer to that of the banking sector. It establishes harmonised rules across the EU for preliminary planning and prevention by companies as well as to ensure orderly ex‑post management by supervisory authorities. The objective is to prevent the failure of an insurer or reinsurer from endangering policyholders, negatively impacting the real economy and financial stability. In other words, the directive elevates continuity beyond coverage to essential services and client relationships, with regulated, harmonised tools to prevent failures and minimise negative repercussions in case of occurrence.

From solvency II to IRRD: strengthening the safety net

Since its introduction, Solvency II has pursued a clear goal: to prevent financial difficulties at insurance companies. It is built upon three well‑known pillars, quantitative requirements, governance and risk management and transparency and reporting, all of which are established to ensure stability before a crisis occurs.

The IRRD picks up where Solvency II leaves off. If despite preventive measures, an insurer finds itself in a situation that threatens its viability, recovery or resolution should be proceed in an orderly manner. To achieve this, the IRRD establishes two essential instruments: pre‑emptive recovery plans, which act as the first stage of response beyond Solvency II and resolution plans, which provide the blueprint for orderly resolution in the event of a crisis. In the future, the central question will shift from “How strong is a company?” to “How orderly can it fail without destabilising customers and the market?”

This systemic supplement is designed to ensure continuity of critical functions and essential services even under stress. It requires companies to integrate recovery planning into governance, maintain up‑to‑date triggers and indicators and demonstrate operational feasibility when resolution plans are executed by authorities. In short, it transforms a preventive architecture into an end‑to‑end framework that spans prevention, recovery and resolution.

Lessons from banking, data imperatives and the path to resolvability

Conceptually, the IRRD follows the logic of the BRRD, adapted to the specific characteristics of insurance. Three lessons, learned from more than a decade of banking resilience, are particularly relevant:

1. Governance determines crisis resilience. Clear roles, decision-making processes and escalation mechanisms are critical to stability rather than simply “nice to have”.
2. Playbooks beat presentations; A recovery plan is only as good as its short-term feasibility and regular dry runs are essential.
3. Data architecture brings speed. Resolvability rarely fails because of rules but because of data breaks; those who underestimate this lose crucial time in an emergency.

Two principles underpin the protective intent of the regime. The “no creditor worse off’ (NCWO) principle protects creditors, including policyholders, by ensuring resolution measures do not leave them worse off than under a normal insolvency process. It is supported by the write-down or conversion tool (WDCT), which allows certain subordinated liabilities to be written down or converted. Together, they provide the necessary assurances for orderly outcomes while authorities deploy resolution strategies and tools.

Plans prepared by national resolution authorities describe how the resolution would be managed. This includes which critical functions must be preserved, which strategy is preferred, what operational actions are required, where impediments exist and what resources are estimated for implementation. Authorities may also employ the sale of business or portfolio transfer to preserve critical functions, set up bridge undertaking to temporarily manage essential assets and liabilities, opt for solvent run‑off to continue management, without taking on new business, and apply write‑down/convertibility of selected liabilities (bail‑in) with the exclusions and protections defined by the directive. The interplay between these tools and the NCWO/WDCT safeguards is central to an orderly resolution.

Practical requirements for resolvability and the Solvency II bridge

Recovery and resolution are the two core elements of the IRRD logic: if a recovery plan fails, resolvability determines whether stability or market disruption prevails. Historically, the blind spot has been the operational feasibility of resolution, the IRRD closes this gap. Resolvability is becoming an explicit supervisory criterion, not simply a theoretical aspiration. In the future, the supervisory authority will assess companies according to clear criteria, including operational continuity, data availability and quality, legal and contractual structures, feasibility of resolution tools and external dependencies. Those who fail to invest in preparation in 2026 will be confronted with formal requirements to remove obstacles to resolution in 2027.

Solvency II continues to provide the risk perspective through implementing Own Risk Solvency Assessments (ORSA), stress tests, governance requirements and outsourcing standards. The IRRD goes a crucial step further and requires these risks to be translated into concrete, implementable crisis mechanisms including:

• Renovation indicators and triggers
• Realistic recovery measures with impact and feasibility analyses
• Systemwide simulations
• Runoff strategies
• Realistic transfer paths
• Dedicated resolution reporting

The added value is not created by new structures but by combining existing building blocks into a holistic control system for stability, recovery and resolution. The resulting reporting regime is independent of Solvency II and remains in place despite relief provided by the Solvency II review.

In practice, this bridge means indicators and triggers must be defined with clarity, responsibilities must be unmistakable, playbooks must be lean and operational, and reporting must be designed for speed. Data architecture should map identifiers across risk, finance and operations, and organise minimum information sets needed for resolution. The feasibility of resolution tools must be demonstrable, not merely assumed.

Building the implementation framework

The IRRD assigns the EIOPA the task of developing Level 2/3 regulations: a package of technical standards and operational guidelines detailing how to implement the directive. Among the documents already under consultation is a draft of regulatory technical standards (RTS) for establishing and operating resolution colleges. These are responsible for coordinating at the insurance group level, the development of resolution plans, the assessment of resolvability and creating the methodology to overcome any obstacles. Additionally, Implementing Technical Standard drafts (ITS) define procedures and a minimum set of standardised templates that companies must use to provide authorities with the information needed to prepare resolution plans.

In total, the planned phase covering the development of technical standards and guidelines foresees approximately nineteen acts across RTS and ITS. Additional guidelines covering the definition of critical functions, market thresholds for recovery and resolution obligations, the content and timing of required information, governance and cross‑border cooperation and resolvability criteria are also in development. Public consultation on some standards has taken place, the complete framework, with detailed regulations and guidelines necessary to fully operate the recovery and resolution regime, is still being defined and will mature through 2026–2027.

For cross‑border groups, resolution colleges will be pivotal with work conducted in a college coordinated among relevant authorities. Companies and groups will need to provide data, test separability, prepare data rooms and implement remedies to impediments. The purpose is to achieve credible, executable resolution strategies that preserve critical functions and uphold the NCWO principle, all while operating within time and information constraints during a crisis.

The 2026 agenda: what companies must address

IRRD has left their political phase behind and has entered the technical implementation phase. Those who remain passive in 2026 will be confronted with finished structures in 2027. What is now needed is a sequence of work that binds governance, data and actionability into a single operational posture.

Proactive engagement

Companies should actively follow consultations and exert influence through associations or their own statements. In parallel, they must organise their internal programmes so that feedback from consultations can be operationalised rather than merely acknowledged. This is the best defence against late-stage surprises when detailed RTS/ITS are finalised.

Strategic positioning

Firms should determine where they stand in the IRRD grid as market position and critical functions determine the depth of regulation. Identifying critical functions, by life or non‑life business lines as well as services and client relationships, should be matched with an analysis of operational and legal separability so that resolution strategies are feasible without impairing continuity.

Governance gap analysis

Committees, roles and decision‑making processes must be tested against severe crisis scenarios. Decision latency and escalation friction are not theoretical but are practical impediments to resolvability. Governance needs to demonstrate clear responsibilities, swift escalation and executable decisions that align with the playbook.

Data roadmap

The question is not simply which source systems feed Solvency II but how those same systems will feed future IRRD reports. Where data fields, identifiers or consistency checks are missing firms must identify and remediate them. The goal is to produce information packs for resolution at high speed and quality that so valuation and continuity decisions can be made without delay.

Recovery blueprint

Based on ORSA, one should build a lean, operational recovery playbook with triggers as well as a catalogue of measures and clear responsibilities. Measures should be realistic and accompanied by impact and feasibility analyses. The blueprint should then be integrated in communications to internal and external stakeholders, preserving confidence when triggers are reached.

Initial exercise

At least one company‑wide trial run in 2026 is essential to identify weaknesses early. Dry runs reveal operational gaps that documents cannot and provide evidence of short‑term feasibility. Overall demonstrating that playbooks are more effective than presentations.

Beyond these agenda items, companies will need to deal with the practical workload implied by recovery and resolution planning, including:

• Scenario analysis must be defined and repeatable, with stresses that test capital, liquidity, asset quality, profitability, market conditions and operational risks.
• Regulatory gap analyses should quantify the distance between current Solvency II practices and the innovations introduced by the IRRD, including the minimum content of pre-emptive recovery plans.
• Governance procedures must be established for monitoring and escalating triggers, updating plans and integrating these processes into the existing governance framework so that business as usual can shift to recovery posture without confusion.
• Recovery options must be assessed for impact, feasibility, operational effect and time to benefit, with impediments and mitigations documented.
• KPIs should be critically evaluated and aligned with risk appetite, governance frameworks and within justified limits and thresholds.
• Strategic analysis should identify main business lines, key services and critical functions, reveal vulnerabilities and assess the credibility of the recovery plan.

This workload is not ancillary. It is the practical representation of the IRRD’s intent that companies be fundamentally stable in their data, decision‑making processes and ability to manage themselves in a crisis.

Impacts and perspectives

In countries where the recovery and resolution framework is less developed for insurance, the IRRD introduces a paradigm shift. Traditional supervisory and crisis management tools will be complemented by preventive and harmonised resolution mechanisms similar to those used in banking. The directive strengthens the role of resolution authorities, providing specific and autonomous powers compared to prudential supervision and by bringing new early intervention and resolution tools that go beyond existing measures. It also introduces a formal process for assessing and removing obstacles to resolvability, defining information requirements and principles for the treatment of policyholders and for safeguarding financial stability.

In practice, the approach shifts from mainly reactive crisis management focused on liquidation procedures to a preventive, planned system oriented toward continuity of critical functions. The impacts can be summarised as:

• Greater prevention through stronger planning and response capacity.
• New obligations around recovery plans and collaboration with authorities.
• Orderly crisis management that reduces systemic risks.
• European harmonisation that improves legal certainty and competitive equality.
• Operational changes to governance, information systems, reporting processes and data management.
• Strengthened cooperation across Member States with coordinated procedures and resolution colleges.
• Possible costs arising from contributions to resolution financing, investments in compliance, risk management and adaptation of contracts and internal procedures.

For insurance groups active in multiple Member States, these perspectives will be experienced through resolution colleges and the standardised information sets that accompany resolution planning. Firms that prepare early, mapping critical functions, testing separability, documenting third‑party dependencies and aligning identifiers, will be better positioned to produce the minimum packs expected under templates and to work with authorities in a coordinated way.

Conclusion: turning mandate into momentum

With the IRRD, insurers face a new era where operational readiness is paramount. Now is the time to strengthen data, governance and crisis management in order to demonstrate true resilience. Testing recovery plans, engaging with regulators and embedding the new requirements into daily operations are essential steps for those aiming to secure stability and trust.

More than a compliance obligation, the IRRD is a catalyst for industry transformation. Integrating resolvability into business processes unlocks efficiencies, builds stakeholder confidence and sets higher standards for excellence. Early adopters will not only meet regulatory demands but also gain a competitive edge in a market that values transparency and resilience.

Looking forward, the IRRD has the potential to reshape cross-border collaboration, data management and responses to systemic risks, redefining the insurer’s role as a pillar of stability in the financial ecosystem.