The Insurance Recovery and Resolution Directive (“IRRD” or “the Directive”) entered into force on 28^th January 2025 and requires Member States to adopt their national implementing rules by 29^th January 2027, with requirements under the Directive applying from 30^th January 2027.

IRRD establishes a harmonised framework for the recovery and resolution of EU (Re)insurance undertakings and, providing new powers to resolution authorities to manage failing entities as an alternative to insolvency proceedings. IRRD also provides for the creation of resolution colleges which will play a role in the decision-making process to address cross-border issues for insurance groups. The college will be chaired by the group-level resolution authority and will include, amongst others, EIOPA, the resolution authorities of the home Member States of all group insurance companies, and the Member States in which those companies carry on significant cross-border activities along with the group supervisor and the supervisory authorities in each Member State whose resolution authority is a member of the college.

Consultation

On 14^th July 2025, the Department of Finance launched a public consultation on the domestic transposition of IRRD. The Consultation aims to provide an overview of IRRD and set out the provisions therein where Member States have a discretion. The consultation considers options for the financing arrangements required under IRRD and the proposals for their transposition into Irish law, and seeks to gather the views of relevant stakeholders on IRRD’s transposition into Irish law, particularly member state discretions (more detail below).

Member State Discretions

The Consultation considers whether Ireland should adopt or maintain rules that are stricter or additional to those laid down in IRRD and in the related delegated and implementing acts. Subject to a review of the recovery-planning requirements for the insurance industry under section 48 of Central Bank (Supervision and Enforcement) Act 2013 pursuant to the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Recovery Plan Requirements for Insurers) Regulations 2021 (“2021 Regulations”),  the Minister is not minded to adopt or maintain stricter requirements than those under IRRD. This may lead to an overhaul and streamlining of the 2021 Regulations.

The Consultation goes on to consider and seek feedback on several specific discretions available to Member States in adopting IRRD:

• Article 26(7) permits Member States to give additional powers and tools to national resolution authorities under certain circumstances, a proposed list of which is presented in the Consultation. The Minister has asked the CBI to consider the need for such powers.
• Article 34(1) permits Member States to use funding schemes established under IRRD to fulfil the obligations of a bridge undertaking.  This discretion is not expected to be exercised as Ireland’s existing Insurance Compensation Fund and Motor Insurers Insolvency Compensation Fund fill this niche.
• Article 35(6) allows Member States to disapply the write down or conversion tool for:

• liabilities arising from current and future insurance claims which are covered by assets in accordance with Article 275(1)(a) of Solvency II; and
• certain liabilities arising under private health insurance contracts or private long-term care insurance contracts provided as an alternative to mandatory health or long-term care cover provided by the statutory social security system.

• Article 52(2) provides that Member States may require that ultimate parent undertakings ensure that in-scope third-country subsidiaries include specific terms in certain contracts. The Consultation states that the Minister’s initial view is that this discretion should be exercised to enhance the effectiveness of the resolution framework.
• Article 67(1) provides the option for Member States to require resolution authorities to obtain judicial pre-approval before taking certain actions. The Department is considering the extent to which the transposing legislation will provide for judicial pre-approval for decisions under IRRD, but indicates that such pre-approval is the preferred option.

Financing Arrangements

Member States are required to establish a financial framework that ensures the NRA has access to sufficient funding. This must align with the “No Creditor Worse Off” principle and support the effective use of resolution tools. Ireland retains discretion in determining whether this funding mechanism will be based on ex-ante contributions, ex-post contributions, or a hybrid model. Additionally, Ireland may decide whether other resolution-related costs can be covered under this framework.

Under Article 81(1), Member States may implement use of financing arrangements to cover other costs associated with the use of resolution tools, where necessary for the achievement of the resolution objectives.  Member states may also use the same administrative structure for their financing arrangements as for their insurance guarantee schemes, although the consultation does not envisage this will be the case in Ireland.

Several financing policy options are considered in detail in Section 4 of the consultation:

• the proposed ex-ante or ex-post nature of the financing arrangements under IRRD;
• the proposed target level for the financing arrangements under IRRD;
• the proposed vehicle structure for the proposed financing arrangements under IRRD;
• the scope of the proposed financing arrangements under IRRD; and
• the proposed metric for calculation of the financial contribution requirement under the transposing legislation.

The Department of Finance now invites stakeholders to submit their views on the transposition of the IRRD, with particular focus on the discretionary elements available to Member States under the Directive. The Consultation closes 5^th September.

To learn more about IRRD, please read our previous blog post here.