Changes from plenary report to adopted text

Removed(22) In order to anticipate the possible interaction of remedial and resolution measures and to enhance the crisis preparedness and the resolvability of groups, any group treatment for pre-emptive recovery and resolution planning should apply to all group entities subject to group supervision. The pre-emptive recovery and resolution plans should take into account the financial, technical and business structure of the group concerned and its degree of internal interconnectedness.

Removed(23) Group pre-emptive recovery and resolution plans should be prepared for the group as a whole and should identify measures in relation to both an ultimate parent undertaking and individual subsidiaries that are part of that group. The extent to which subsidiaries are considered in the group pre-emptive recovery and resolution plans should, however, be proportionate to their relevance to the group and to policy holders, the real economy and the financial system in the Member States where those subsidiaries operate. The resolution authorities of the Member States where a group has subsidiaries should be involved in the drawing up of any resolution plans. The authorities concerned, acting within the supervisory or resolution colleges, should make every effort to reach a joint decision on the assessment and adoption of those plans. However, adequate crisis preparedness should not be affected by an absence of a joint decision within the supervisory or resolution colleges. In such cases, each supervisory authority responsible for a subsidiary should have the possibility to require a pre-emptive recovery plan for the subsidiaries under its jurisdiction and make its own assessment of the pre-emptive recovery plan. For the same reasons, each resolution authority responsible for a subsidiary should, for the subsidiaries under its jurisdiction, draw up ▐a resolution plan. The drawing up of individual pre-emptive recovery and resolution plans for undertakings that are a part of a group should remain exceptional, duly justified and apply the same standards that are applied to comparable undertakings in the Member State concerned. Where individual pre-emptive recovery and resolution plans for undertakings that are a part of a group are prepared, the authorities concerned should aim to achieve, to the extent possible, consistency with pre-emptive recovery and resolution plans for the rest of the group.

Removed(23a) There is a risk that financial conglomerates are simultaneously within the scope of this Directive and Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms (BRRD). This might lead to two separate pre-emptive recovery plans and two separate resolution plans. To avoid excessive burden, financial conglomerates should be permitted to draw up one single pre-emptive recovery plan for the whole group. Likewise, it should be sufficient to require the resolution authority to draw up one single resolution plan for the whole group. If a competent supervisory authority comes to the conclusion that a particular business field within a specific financial conglomerate is not sufficiently covered, it should be able to request the group to draw up a dedicated recovery plan for the entity which is active in that particular business field.

Removed(24) In order to keep all authorities concerned fully and permanently informed, supervisory authorities should transmit any pre-emptive recovery plans and any changes thereto to the resolution authorities concerned and resolution authorities should transmit any resolution plans and any changes thereto to the supervisory authorities concerned.

Removed(25) Based on an assessment of the resolvability of insurance or reinsurance undertakings, resolution authorities should have the power to require, either directly or indirectly through the supervisory authority, that insurance or reinsurance undertakings change their structure and organisation. Resolution authorities should also be able to take necessary but proportionate measures to reduce or remove any material impediments to the application of resolution tools and to ensure the resolvability of the entities concerned. Resolution authorities should assess the resolvability of insurance or reinsurance undertakings at the level of those undertakings where it is expected that, in accordance with the group resolution plan, resolution actions would be taken. The resolution authorities’ ability to request changes to the structure and organisation of an insurance or reinsurance undertaking, or to take measures to reduce or remove any material impediments to the application of resolution tools and to ensure the resolvability of the undertakings concerned, should not go beyond what is necessary to simplify the structure and operations of the insurance or reinsurance undertaking concerned in order to improve that undertaking’s resolvability.

Removed(26) The implementation of actions outlined in a pre-emptive recovery plan or a resolution plan may have effects on staff of insurance or reinsurance undertakings. Those plans should therefore contain procedures for informing and consulting employee representatives throughout the recovery and resolution processes where appropriate. Those procedures should take into account collective agreements, other arrangements provided for by social partners, and national and Union law on the involvement of trade unions and workers’ representatives in company restructuring processes.

Removed(27) Effective recovery and resolution of insurance and reinsurance undertakings or group entities operating across the Union requires cooperation among supervisory authorities and resolution authorities within supervisory and resolution colleges at all stages of the process, from the preparation of pre-emptive recovery and resolution plans to the actual resolution of an undertaking. Where authorities disagree on decisions to be taken with regard to groups and undertakings, the European Supervisory Authority (European Insurance and Occupational Pensions Authority) (‘EIOPA’), established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council should, as a last resort, play a mediation role.

Removed(28) During the recovery and preventive phases, shareholders should retain full responsibility and control of the insurance or reinsurance undertaking. They should no longer retain such a responsibility once the undertaking has been put under resolution. The resolution framework should therefore provide for a timely entry into resolution, that is before an insurance or reinsurance undertaking is balance sheet or cash flow insolvent, before all equity has been fully wiped out, or before the insurance or reinsurance undertaking is unable to comply with its payment obligations as they come due. Resolution should be initiated where a supervisory authority, after having consulted a resolution authority, or after having been consulted by a resolution authority, determines that an insurance or reinsurance undertaking is failing or likely to fail and alternative measures would not prevent such a failure within a reasonable timeframe. An insurance or reinsurance undertaking should be considered to be failing or likely to fail in any of the following circumstances: (i) where the undertaking breaches or is likely to be in breach of the Minimum Capital Requirement (‘MCR’) laid down in Title I, Chapter VI, Section 4, of Directive 2009/138/EC and where there is no reasonable prospect of compliance being restored; (ii) where the undertaking no longer fulfils the conditions for authorisation or where the undertaking fails seriously to comply with its legal obligations under the laws and regulations to which it is subject or is likely to seriously fail to comply with its legal obligations under the laws and regulations to which it is subject in the near future in a way that would justify the withdrawal of the authorisation; (iii) where the insurance or reinsurance undertaking is or is likely to be unable to pay its debts or other liabilities in the near future, including payments to policy holders or beneficiaries as they fall due; or (iv) where the insurance or reinsurance undertaking requires extraordinary public financial support.

Removed(29) The use of resolution tools and powers may disrupt the rights of shareholders and creditors of insurance and reinsurance undertakings. In particular, the power of the resolution authorities to transfer the shares or all or part of the assets of an insurance or reinsurance undertaking to a private purchaser without the consent of shareholders affects the property rights of shareholders. In addition, the power to decide which liabilities to transfer out of a failing undertaking to ensure the continuity of services and to avoid adverse effects on policy holders, beneficiaries and injured parties, the real economy or financial stability as a whole, may affect the equal treatment of creditors. Any resolution tool should therefore be applied only to those insurance or reinsurance undertakings that are failing or likely to fail, and only where it is necessary to pursue the resolution objectives in the general interest. In particular, resolution tools should be applied only where the insurance or reinsurance undertaking cannot be wound up under normal insolvency proceedings without unduly affecting the protection of policy holders, beneficiaries and claimants or destabilising the financial system. In addition, resolution measures should be necessary to ensure the rapid transfer and continuation of critical functions and there should be no reasonable prospect for any alternative private solution, including any increase of capital by the existing shareholders or by any third party sufficient to restore the full viability of the entity without having effect on insurance claims. Any interference with the rights of shareholders and creditors that results from resolution action should be compatible with the Charter of Fundamental Rights of the European Union (the Charter). In particular, where creditors within the same class are treated differently in the context of resolution action, such distinctions should be justified in the public interest and be proportionate to the risks being addressed and should be neither directly nor indirectly discriminatory on the grounds of nationality.

Removed(30) When applying resolutions tools and exercising resolution powers, resolution authorities should take all appropriate measures to ensure that resolution action is taken in accordance with the principle that insurance claims are affected after shareholders and that other creditors have borne their share of the losses. In addition, resolution authorities should ensure that the costs of the resolution of insurance or reinsurance undertakings are minimised and that creditors of the same class are treated in an equitable manner.

Removed(31) The write-down or conversion of capital instruments, debt instruments and other eligible liabilities should provide for an internal loss absorption mechanism. That mechanism, combined with transfer tools that aim at maintaining continuity of insurance coverage for the benefit of policy holders, beneficiaries and injured parties, should allow for the achievement of the resolution objectives and should limit to a great extent the impact of a failure of an insurance or reinsurance undertaking on policy holders. There may be extreme cases, however, where the resolution of an insurance or reinsurance undertaking may require the intervention of specific national schemes, in particular an insurance guarantee scheme or a resolution fund, to provide for complementary loss absorbing and restructuring resources or, as a last resort, extraordinary public financing. The necessary safeguards that aim to protect creditors should also reflect the existence of such specific national schemes, which in turn have to comply with the Union State aid framework. The write-down or conversion tool should be applied before the use of any extraordinary public financial support.

Removed(32) Interference with property rights should not be disproportionate. Affected shareholders and creditors of insurance and reinsurance undertakings, including policy holders should therefore not incur greater losses than they would have incurred if the insurance or reinsurance undertaking had been wound up at the time that the resolution decision was taken. In the event of a partial transfer of assets and liabilities of an insurance or reinsurance undertaking under resolution to a private purchaser or to a bridge undertaking, the residual part of the undertaking under resolution should be wound up under normal insolvency proceedings. Shareholders and creditors who are left in the winding up proceedings of an insurance or reinsurance undertaking should be entitled to receive in payment of, or compensation for, their claims in the winding up proceedings not less than what they would have recovered if the whole insurance or reinsurance undertaking had been wound up under normal insolvency proceedings.

Removed(33) To protect the rights of shareholders and creditors, it is necessary to lay down clear obligations concerning the valuation of the assets and liabilities of the undertaking under resolution and concerning the valuation of the treatment that shareholders and creditors would have received if the undertaking had been wound up under normal insolvency proceedings. It is therefore necessary to lay down that, before any resolution action is taken, a fair and realistic valuation of the assets and liabilities of the insurance or reinsurance undertaking is carried out. Such a valuation should be subject to a right of appeal. However, due to the nature of resolution action and its close link with the valuation, such appeal should only be possible where it is simultaneously directed against the resolution decision. In addition, it is necessary to lay down that, after resolution tools have been applied, a comparison is made between the treatment that shareholders and creditors have actually received and the treatment they would have received under normal insolvency proceedings. That ex-post comparison should be challengeable apart from the resolution decision. Shareholders and creditors that have received less than the amount that they would have received under normal insolvency proceedings should be entitled to the payment of the difference.

Removed(34) It is important that losses are recognised upon failure of the insurance or reinsurance undertaking. The valuation of assets and liabilities of failing insurance or reinsurance undertakings should be based on fair, prudent and realistic assumptions at the moment that the resolution tools are applied. The value of liabilities should, however, not be affected in the valuation by the insurance or reinsurance undertaking’s financial state. It should be possible, in exceptional cases of urgency, that resolution authorities make a rapid valuation of the assets or the liabilities of a failing insurance or reinsurance undertaking. That valuation should be provisional and should apply until an independent valuation is carried out. EIOPA should establish a framework of principles to be used in conducting such valuations and should allow for different specific methodologies to be applied by resolution authorities and independent valuers, as appropriate.

Removed(35) When taking resolution actions, resolution authorities should take into account and follow the measures provided for in the resolution plans unless resolution authorities assess, taking into account circumstances of the case, that resolution objectives will be achieved more effectively by taking actions that are not provided for in the resolution plans.

Removed(36) Resolution tools should be designed and suitable to counter a broad set of largely unpredictable scenarios, taking into account that there could be a difference between a single insurance or reinsurance undertaking in crisis and a broader systemic crisis. Resolution tools should therefore cover each of those scenarios, including the solvent run-off of the undertaking under resolution until its termination, the sale of the business or shares of the undertaking under resolution, the setting up of a bridge undertaking, the separation of assets and liabilities from the impaired or under-performing portfolios of the failing undertaking, and the write-down or conversion of capital instruments and other eligible liabilities of the failing insurance or reinsurance undertaking.

Removed(37) Where resolution tools have been used to transfer insurance portfolios to a sound entity, which could be a private sector purchaser or a bridge undertaking, the residual part of the undertaking should be liquidated within an appropriate time frame. The length of that time frame should be based on the need for the failing insurance or reinsurance undertaking to provide services or support to enable the private sector purchaser or bridge undertaking to carry out the activities or services acquired by virtue of that transfer.

Removed(37a) Financing arrangements should be established in each Member State to compensate policy holders of insurance and reinsurance undertakings authorised in that Member State. While directly absorbing the losses of an insurance company should be avoided, it should be possible to use such financing arrangements to finance other costs associated with the use of resolution tools as a last resort , to the extent necessary to achieve the resolution objectives and insofar as the resolution principles are fully respected. Acknowledging the diversity in insurance markets, Member States should be given some flexibility in relation to the precise arrangements of external financing as long as the availability of sufficient liquidity to guarantee compensation within a reasonable timeframe is ensured. A Member State should impose a contribution obligation only to insurance and reinsurance undertakings authorised in that Member State and to Union branches of a third country undertaking which are established in its territory.

Removed(38) The sale of business tool should enable resolution authorities to effect a sale of the insurance or reinsurance undertaking or parts of its business to one or more purchasers without the consent of shareholders. When applying the sale of business tool, authorities should make arrangements for the marketing of that insurance or reinsurance undertaking or part of its business in an open, transparent and non-discriminatory process, while maximising the sale price as much as possible. Where, for reasons of urgency, such a process is impossible, authorities should take steps to redress detrimental effects on competition and on the internal market.

Removed(39) Any net proceeds from the transfer of assets or liabilities of the undertaking under resolution when applying the sale of business tool should benefit the undertaking left in the winding up proceedings. Any net proceeds from the transfer of shares or other instruments of ownership issued by the undertaking under resolution when applying the sale of business tool should benefit the owners of those shares or other instruments of ownership. Proceeds should be calculated net of the costs arisen from the failure of the insurance or reinsurance undertaking and from the resolution process.

Removed(40) Information concerning the marketing of a failing insurance or reinsurance undertaking and negotiations with potential acquirers prior to the application of the sale of business tool are likely to be sensitive and may pose risks for the trust in the insurance market. It is therefore important to ensure that the disclosure to the public of such information, which is required by Regulation (EU) No 596/2014 of the European Parliament and of the Council, can be delayed for the time necessary to plan and structure the resolution of the insurance or reinsurance undertaking.

Removed(41) A bridge undertaking is an insurance or reinsurance undertaking that is wholly or partially owned by one or more public authorities or controlled by the resolution authority. The main purpose of a bridge undertaking is to ensure that critical functions continue to be provided to the policy holders of the failing insurance or reinsurance undertaking. A bridge undertaking should therefore be operated as a viable going concern and should be put back on the market as soon as conditions are appropriate, or be wound up in case the bridge undertaking is not viable.

Removed(42) The asset and liability separation tool should enable authorities to transfer assets, rights or liabilities of an undertaking under resolution to a separate vehicle in order to remove, manage and wind down such assets, rights or liabilities. To prevent an undue competitive advantage for the failing insurance or reinsurance undertaking, the asset and liability tool should be used only in conjunction with other tools.

Removed(43) An effective resolution regime should ensure that insurance or reinsurance undertakings can be resolved in a way that minimises the negative impact of a failure on policy holders, taxpayers, the real economy and financial stability. The write-down or conversion should ensure that, before insurance claims are affected, shareholders and creditors of a failing insurance or reinsurance undertaking suffer losses first and bear an appropriate part of the costs arising from the failure of the insurance or reinsurance undertaking as soon as a resolution power is used. The write-down or conversion tool should thus give shareholders and creditors of insurance or reinsurance undertakings and, to a certain extent, policy holders, a stronger incentive to monitor the health of an insurance or reinsurance undertaking during normal circumstances.

Removed(44) It is necessary to ensure that resolution authorities have the necessary flexibility, in a range of circumstances, to place the undertaking in resolution in a solvent run-off, to transfer its assets, rights and liabilities in the best conditions for policy holders, or to allocate remaining losses. It is therefore appropriate to lay down that resolution authorities should be able to apply the write-down or conversion tool both where the objective is to resolve the failing insurance or reinsurance undertaking as an undertaking in solvent run-off, and where critical insurance services are transferred while the residual part of the insurance or reinsurance undertaking ceases to operate and is wound up. In that context, the restructuring of insurance liabilities may be warranted to ensure the continuation of a material portion of the insurance coverage and where that is deemed in the best interest of the policy holders.

Removed(45) Where there is a realistic prospect that the undertaking’s viability may be restored and policy holders are not suffering any losses in the resolution process, the write-down or conversion tool could be used to restore the undertaking under resolution to a going concern. In such case, the resolution through write-down or conversion should be accompanied by the replacement of the management, except where the retention of the management is appropriate and necessary for the achievement of the resolution objectives.

Removed(46) It is not appropriate to apply the write-down or conversion tool to claims as far as they are secured, collateralised or otherwise guaranteed as such write-down or conversion could be ineffective or due to the potential negative impact of such write-down or conversion on financial stability. However, in order to ensure that the write-down or conversion tool is effective and achieves its objectives, it is desirable that it can be applied to as wide a range of the unsecured liabilities of a failing insurance or reinsurance undertaking as possible. Nevertheless, it is appropriate to exclude certain kinds of unsecured liabilities from the scope of application of the write-down or conversion tool. Thus, to ensure the continuity of critical functions, the write-down or conversion tool should not be applied to certain liabilities to employees of the failing insurance or reinsurance undertaking or to commercial claims that relate to goods and services critical to the daily functioning of the insurance or reinsurance undertaking. To honour pension entitlements and pension amounts owed or owing to pension trusts and pension trustees, the write-down or conversion tool should not be applied to a failing insurance or reinsurance undertaking’s liabilities to a pension scheme. To reduce the risk of systemic contagion, the write-down or conversion tool should neither be applied to liabilities arising from a participation in payment systems which have a remaining maturity of less than seven days, or to liabilities to insurance or reinsurance undertakings, credit institutions and investment firms, with the exception of entities that are part of the same group, with an original maturity of less than seven days.

Removed(47) The protection of policy holders, beneficiaries or injured parties is one of the main objectives of resolution. Insurance claims should therefore only be subject to the application of the write-down or conversion tool as a last resort measure and resolution authorities should carefully consider the consequences of a potential write-down of insurance claims stemming from insurance contracts held by natural persons and micro, small and medium-sized enterprises.

Removed(48) Resolution authorities should be able to exclude or partially exclude liabilities in a number of circumstances where it is not possible to write-down or convert such liabilities within a reasonable timeframe, where the exclusion is strictly necessary and proportionate to achieve the resolution objectives, or where the application of the write-down or conversion tool would cause a destruction in value such that losses borne by other creditors would be higher than if those liabilities were not excluded. Where those exclusions are applied, the level of write-down or conversion of other eligible liabilities may be increased to take account of such exclusions, subject to the ‘no creditor worse off than under normal insolvency proceedings’ principle being respected. At the same time, Member States should not be required to finance resolution from their general budget.

Removed(49) As a rule, resolution authorities should apply the write-down or conversion tool in a way that respects the pari passu treatment of creditors and the statutory ranking of claims under applicable insolvency law. Losses should therefore first be absorbed by regulatory capital instruments and should be allocated to shareholders either through the cancellation or transfer of shares or through severe dilution. Where that is not sufficient, subordinated debt should be converted or written down. Senior liabilities should only be converted or written down where the subordinate debt has been converted or written down entirely.

Removed(50) Exemptions of liabilities, inter alia for payment and settlement systems, employee or trade creditors, or preferential ranking, should equally apply in third countries and the Union. To ensure that liabilities can be written-down or converted in third countries, it is necessary to lay down that contractual provisions governed by the law of third countries recognise that possibility. Such contractual terms should not be required for liabilities exempted from the application of the write-down or conversion tool, or where the law of the third country or a binding agreement concluded with that third country allow the resolution authority of the Member State concerned to apply the write-down or conversion tool.

Removed(51) Shareholders and creditors should contribute, to the extent necessary, to the loss allocation mechanism of a failing undertaking. Therefore, Member States should ensure that Tier 1, Tier 2 and Tier 3 capital instruments fully absorb losses at the point of non-viability of the issuing insurance or reinsurance undertaking. Accordingly, resolution authorities should be required to write-down those instruments in full, or to convert them, where applicable, to Tier 1 instruments, at the point of non-viability and before any resolution action is taken. For that purpose, the point of non-viability should be understood as either the point at which the resolution authority concerned determines that the insurance or reinsurance undertaking meets the conditions for resolution, or the point at which the resolution authority concerned decides that the insurance or reinsurance undertaking would cease to be viable if those capital instruments were not written down or converted. Those requirements should be recognised in the terms governing the instrument, and in any prospectus or offering documents published or provided in connection with the instruments.

Removed(52) Resolution authorities should have all the necessary legal powers that, in different combinations, may be exercised when applying the resolution tools in order to ensure effective execution of resolution. Those legal powers should include the power to transfer shares in, or assets, rights or liabilities of, a failing insurance or reinsurance undertaking to another entity, including another undertaking or a bridge undertaking, the power to write-down or cancel shares, or write-down or convert liabilities of a failing insurance or reinsurance undertaking, the power to replace the management and the power to impose a temporary moratorium on the payment of claims. Ancillary powers are needed, including the power to require continuity of essential services from other parts of a group.

Removed(53) It is not necessary to prescribe the exact means through which the resolution authorities should intervene in the failing insurance or reinsurance undertaking. Resolution authorities should have the choice between taking control through a direct intervention in the insurance or reinsurance undertaking or through executive order. They should decide according to the circumstances of the case.

Removed(54) It is necessary to lay down procedural requirements to ensure that resolution actions are properly notified and made public. Information obtained by resolution authorities and their professional advisers during the resolution process is, however, likely to be sensitive and should therefore be subject to an effective confidentiality regime before the resolution decision is made public. Any information provided in respect of a decision before it is taken, be it on whether the conditions for resolution are satisfied, on the use of a specific tool or of any action during the proceedings, must be presumed to have effects on the public and private interests concerned by the action. It is therefore necessary to ensure that there are appropriate mechanisms for maintaining the confidentiality of such information, including on the content and details of recovery and resolution plans and the result of any assessment carried out in that context.

Removed(55) Resolution authorities should have ancillary powers to ensure the effectiveness of the transfer of shares or debt instruments and assets, rights and liabilities to a third party purchaser or a bridge undertaking. In particular, to facilitate a transfer of insurance claims without affecting the overall risk profile of the related portfolio and of the associated technical provisions and capital requirements, the economic benefits provided by reinsurance agreements should be preserved. Resolution authorities should therefore have the ability to transfer insurance claims together with their corresponding reinsurance rights. That ability should also include the power to remove third parties rights from the transferred instruments or assets, the power to enforce contracts and the power to provide for the continuity of arrangements vis-à-vis the recipient of the transferred assets and shares. The right of a party to terminate a contract with an undertaking under resolution, or a group entity thereof, for reasons other than the resolution of the failing insurance or reinsurance undertaking should also remain unaffected. In addition, resolution authorities should have the ancillary power to require the residual insurance or reinsurance undertaking that is being wound up under normal insolvency proceedings to provide services that are necessary to enable the undertaking to which assets or shares have been transferred by virtue of the application of the sale of business tool or the bridge undertaking tool to operate its business.

Removed(56) According to Article 47 of the Charter, everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal. The decisions taken by resolution authorities should therefore be subject to a right of appeal.

Removed(57) Crisis management measures taken by resolution authorities may require complex economic assessments and a large margin of discretion. Resolution authorities are specifically equipped with the expertise needed for making such assessments and for determining the appropriate use of the margin of discretion. It is therefore important to ensure that the complex economic assessments made by resolution authorities in that context are used as a basis by national courts when reviewing the crisis management measures concerned. However, the complex nature of those assessments should not prevent national courts from examining whether the evidence relied on by the resolution authority is factually accurate, reliable and consistent, whether that evidence contains all relevant information which should be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn therefrom.

Removed(58) In order to deal with situations of urgency, it is necessary to provide that the lodging of any appeal does not result in automatic suspension of the effects of the challenged decision and that the decision of the resolution authority is immediately enforceable with a presumption that its suspension would be against the public interest.

Removed(59) It is necessary to protect third parties that have acquired assets, rights and liabilities of the institution under resolution in good faith by virtue of the exercise of the resolution powers by the authorities. It is equally necessary to ensure the stability of the financial markets. A right of appeal against a resolution decision should therefore not affect any subsequent administrative act or transaction concluded on the basis of an annulled decision. In such cases, remedies for a wrongful decision should be limited to the award of compensation for the damages suffered by the affected persons.

Removed(60) Crisis management measures may be required to be taken urgently due to serious financial stability risks in the Member State concerned and the Union. Any procedure under national law relating to the application for ex-ante judicial approval of a crisis management measure and a court’s consideration of such an application should therefore be swift. Member States should ensure that the authority concerned can take its decision immediately after a court has given its approval. That possibility should be without prejudice to the right of interested parties to make an application to the court to set aside the decision. However, such possibility should only be granted for a limited period after the resolution authority has taken the crisis management measure in order not to unduly delay the application of the resolution decision.

Removed(61) Efficient resolution and the need to avoid conflicts of jurisdiction require that no normal insolvency proceedings for a failing insurance or reinsurance undertaking be opened or continued whilst a resolution authority is exercising its resolution powers or applying resolution tools, except at the initiative of, or with the consent of, the resolution authority. It is therefore necessary to lay down that certain contractual obligations can be suspended for a limited period to enable resolution authorities to apply the resolution tools. That possibility should not, however, apply to obligations in relation to systems designated by a Member State as referred to in Directive 98/26/EC of the European Parliament and of the Council, including central counterparties. Directive 98/26/EC reduces the risk associated with participation in payment and securities settlement systems, in particular by reducing disruption in the event of the insolvency of a participant in such a system. It is necessary to ensure that those protections continue to apply in crisis situations and that appropriate certainty for operators of payment and securities systems and other market participants is maintained. A crisis prevention measure or a crisis management measure should therefore not, per se, be deemed to constitute insolvency proceedings within the meaning of Directive 98/26/EC, provided that the substantive obligations under the contract concerned continue to be performed.

Removed(62) It is necessary to ensure that resolution authorities, when transferring assets and liabilities to a private sector purchaser or a bridge undertaking, have an adequate period of time to identify contracts that need to be transferred. It should therefore be possible for resolution authorities to restrict counterparties’ rights to close out, accelerate or otherwise terminate financial contracts before the transfer is made. Such restrictions should allow resolution authorities to obtain a true picture of the balance sheet of the failing insurance or reinsurance undertaking without the changes in value and scope that an extensive exercise of termination rights would entail, and should help to avoid creating market instability. Interference with the contractual rights of counterparties should however be restricted to the minimum extent necessary. Any restrictions on termination rights imposed by resolution authorities should therefore only apply in relation to crisis management measures or events directly linked to the application of such measures. Rights to terminate arising from any other default, including failure to pay or deliver margin, should thus remain.

Removed(63) It is necessary to preserve legitimate capital market arrangements in the event of a transfer of some, but not all, of the assets, rights and liabilities of a failing insurance or reinsurance undertaking. It is therefore appropriate to lay down safeguards to prevent the splitting of linked liabilities or linked rights and contracts, including contracts with the same counterparty covered by security arrangements, title transfer financial collateral arrangements, set-off arrangements, close out netting agreements, and structured finance arrangements. Where such safeguards apply, resolution authorities should be bound to transfer all linked contracts within a protected arrangement, or leave them all with the residual failing insurance or reinsurance undertaking. Those safeguards should ensure that the regulatory capital treatment of exposures covered by a netting agreement for the purposes of Directive 2009/138/EC is not affected.

Removed(64) In order to provide financial stability to the insurance and reinsurance undertaking a moratorium on surrender rights of policy holders should be introduced. Such a moratorium and the ensuing financial stability for the undertaking concerned should provide the resolution authorities with sufficient time to valuate those undertakings and to assess which resolution tools should be applied. Such a moratorium should also ensure equal treatment of policy holders, and thus avoid potential adverse financial impacts on policy holders that would not be among the first ones to surrender their policy. Because one of the objectives of resolution is the continuation of insurance cover, policy holders should continue to make any obligatory payments under the insurance contracts concerned, including in the case of annuities.

Removed(65) Ensuring that resolution authorities have the same resolution tools and powers at their disposal will facilitate coordinated action in the event of a failure of a cross-border group. Further action, however, is necessary to promote cooperation and prevent fragmented national responses. To agree to a group resolution scheme when resolving group entities, resolution authorities should therefore be required to consult each other and cooperate in resolution colleges. To provide for a forum for discussion and reaching such agreement, resolution colleges should be established around the core of the existing supervisory colleges through the inclusion of resolution authorities and the involvement of competent ministries, EIOPA and, where appropriate, authorities responsible for the insurance guarantee schemes. Resolution colleges should not be decision-making bodies, but platforms facilitating decision-making by national authorities, while it should be for the national authorities concerned to take the joint decisions.

Removed(65a) The global financial crisis also showed the need for high levels of protection for policy holders. The introduction of insurance guarantee schemes should therefore be advanced. A harmonised framework of national IGSs would help to minimisereliance on public funds by providing equal protection to policy holders and beneficiaries in the event of an insurer’s insolvency. Indeed, the current lack of homogeneity between national IGSs leads to unequal treatment of policy holders and beneficiaries of to the same insurer, as demonstrated by recent cross-border insurance failures. After sufficient experience in the application of this Directive has been gained, the Commission, after consulting EIOPA, should evaluate and report to the European Parliament and the Council on the possibility of introducing harmonised minimum basic requirements for insurance guarantee schemes in the Union and the steps that would be necessary in order to do so.

Removed(66) Resolution of cross-border groups should strike a balance between, on the one hand, the need for procedures that take into account the criticality of the situation and allow for efficient, fair and timely solutions for the group as a whole and, on the other hand, the necessity to protect policy holders, the real economy and financial stability in all the Member States where the group operates. The different resolution authorities should therefore share their views in the resolution college and any resolution actions proposed by the group resolution authority should be prepared and discussed amongst different resolution authorities in the context of the group resolution plans. In order to facilitate swift and joint decisions wherever possible, resolution colleges should also take into account the views of the resolution authorities of all the Member States in which the group is active.

Removed(67) Resolution actions by the group resolution authority should always take into account their impact on policy holders, the real economy and financial stability in the Member States where the group operates. Resolution authorities of the Member State in which a subsidiary undertaking is established should therefore have the possibility to object, as a last resort and in duly justified cases, to the decisions of the group resolution authority where those resolution authorities are of the opinion that the resolution actions and measures are not appropriate, either because of the need to protect policy holders, the real economy and financial stability in that Member State, or because of obligations that comparable undertakings in that Member States are subject to.

Removed(68) Group resolution schemes should facilitate coordinated resolution, which is more likely to deliver the best result for all undertakings of a group. Group resolution authorities should therefore propose group resolution schemes and submit those schemes to the resolution college. Resolution authorities that disagree with a group resolution scheme or decide to take independent resolution action should explain to the group resolution authority and other resolution authorities covered by the group resolution scheme the reasons for their disagreement and notify those reasons, together with details of any independent resolution action they intend to take. Any resolution authority that decides to depart from the group resolution scheme should duly consider the potential impact of such departure on policy holders, the real economy and financial stability in the Member States where the other resolution authorities are located and the potential effects of such departure on other parts of the group.

Removed(69) To ensure coordinated action at group level, resolution authorities should be invited to apply, within a group resolution scheme, the same tool to entities belonging to the group that meet the conditions for resolution. Group resolution authorities should thus have the power to apply the bridge undertaking tool at group level to stabilise a group as a whole and to transfer ownership of subsidiaries to the bridge undertaking with a view to the onward sale of such subsidiaries, either as a package or individually, when market conditions are appropriate. In addition, the group-level resolution authority should have the power to apply the write-down or conversion tool at parent level.

Removed(70) Effective resolution of internationally active insurance and reinsurance undertakings and groups requires cooperation between Member States and third-country resolution authorities. For that purpose, where it is justified by the situation at hand, EIOPA should be empowered to develop and enter into non-binding framework cooperation arrangements with authorities of third countries in accordance with Article 33 of Regulation (EU) No 1094/2010. For the same reason, national authorities should be permitted to conclude bilateral arrangements with third country authorities in line with EIOPA’s framework cooperation agreements. The development of such bilateral arrangements should ensure effective planning, decision-making and coordination in respect of such internationally active insurance and reinsurance undertakings. In order to create a level playing field, such bilateral arrangements should be reciprocal, with resolution authorities recognising and enforcing each other’s proceedings, unless any exception that allows for rejection of recognition of third country resolution proceedings applies.

Removed(71) Cooperation between resolution authorities should take place both with regard to subsidiaries of Union or third-country groups as with regard to branches of Union or third-country insurance and reinsurance undertakings. Subsidiaries of third-country groups are undertakings established in the Union and are therefore fully subject to Union law, including the application of any resolution tools. It is necessary, however, that Member States retain the right to act in relation to branches of insurance and reinsurance undertakings having their head office in third countries, where the recognition and application of third-country resolution proceedings relating to a branch would endanger the real economy or financial stability in the Union, or where Union policy holders would not receive equal treatment with third-country policy holders. In those circumstances, Member States should have the right, after having consulted their resolution authorities, to refuse recognition of third-country resolution proceedings.

Removed(72) EIOPA should promote convergence of the practices of resolution authorities through guidelines that are issued in accordance with Article 16 of Regulation (EU) No 1094/2010. More in particular, EIOPA should specify all of the following: (a) the application of simplified obligations for certain undertakings; ▐(b) a minimum list of qualitative and quantitative indicators and a range of scenarios for pre-emptive recovery plans; (c) the criteria for the identification of critical functions; (d) the details on the measures to address or remove impediments to resolvability and the circumstances in which each measure may be applied; and (e) how information should be provided in summary or collective form for the purpose of confidentiality requirements.

Removed(73) Technical standards in financial services should facilitate consistent harmonisation and adequate protection of policy holders, investors and consumers across the Union. As a body with highly specialised expertise, it would be efficient and appropriate, to entrust EIOPA with the development of draft regulatory and implementing technical standards which do not involve policy choices, for submission to the Commission.

Removed(74) The Commission should, where provided for in this Directive, adopt draft regulatory technical standards developed by EIOPA by means of delegated acts pursuant to Article 290 TFEU, in accordance with Articles 10 to 14 of Regulation (EU) No 1094/2010 to specify the following elements: (a) the information to be contained in the pre-emptive recovery plans; (b) the content of resolution plans and the content of group resolution plans; (c) the matters and criteria for the assessment for resolvability; (d) different elements on valuation, including the methodology for calculating the buffer for additional losses to be included in provisional valuations and the methodology for carrying out the valuation of difference in treatment; (e) the contents of the contractual term to be included in financial contract governed by third-country law; (f) the operational functioning of resolution colleges. The Commission should, where provided for in this Directive, adopt draft implementing technical standards developed by EIOPA by means of implementing acts pursuant to Article 291 TFEU, in accordance with Article 15 of Regulation (EU) No 1094/2010 to specify the procedures, content and minimum set of standard forms and templates for the provision of information for the purpose of resolution plans and cooperation from the insurance or reinsurance undertaking.

Removed(75) Directive 2009/138/EC provides for the mutual recognition and enforcement in all Member States of decisions concerning the reorganisation or winding up of insurance undertakings. That Directive ensures that all assets and liabilities of the undertaking, regardless of the country in which they are situated, are dealt with in a single process in the home Member State and that creditors in the host Member States are treated in the same way as creditors in the home Member State. In order to achieve an effective resolution, the provisions on reorganisation and winding-up laid down in Directive 2009/138/EC should apply in the event of use of the resolution tools, both where those instruments are applied to insurance and reinsurance undertakings and where they are applied to other entities covered by the resolution regime. Those provisions should therefore be amended accordingly.

Removed(76) Directive 2004/25/EC of the European Parliament and of the Council, Directive 2007/36/EC of the European Parliament and of the Council and Directive (EU) 2017/1132 of the European Parliament and of the Council, contain rules on the protection of shareholders and creditors of undertakings that fall within the scope of those Directives. In a situation where resolution authorities need to act rapidly, those rules might hinder effective resolution action and application of resolution tools and powers by resolution authorities. Derogations under Directive 2014/59/EU of the European Parliament and of the Council and Regulation (EU) 2021/23 of the European Parliament and of the Council should therefore be extended to actions taken in the context of the resolution of insurance and reinsurance undertakings. In order to guarantee the maximum degree of legal certainty for stakeholders, such derogations should be set out clearly, should be narrow, and should only be used in the public interest and when resolution triggers are met.

Removed(77) To provide adequate information sharing and access to all concerned authorities, it is necessary to ensure that resolution authorities are represented in all relevant fora and that EIOPA benefits from the expertise necessary to carry out the tasks related to the recovery and resolution of insurance and reinsurance undertakings. Therefore, Regulation (EU) No 1094/2010 should be amended to designate resolution authorities as competent authorities as referred to in that Regulation. Such assimilation between resolution authorities and competent authorities is consistent with the functions attributed to EIOPA pursuant to Article 25 of Regulation (EU) No 1094/2010 to contribute and participate actively in the development and coordination of recovery and resolution plans.

Removed(78) It is necessary ensure that insurance and reinsurance undertakings, those who effectively control their business, and their administrative, management or supervisory body comply with their obligations in relation to the resolution of such undertakings. It is equally necessary to ensure that those undertakings, those who effectively control their business, and their administrative, management or supervisory body are subject to similar treatment across the Union. Member States should therefore be required to provide for administrative sanctions and other administrative measures which are effective, proportionate and dissuasive. Such administrative sanctions and other administrative measures should satisfy certain essential requirements in relation to addressees, criteria to be taken into account when applying an administrative sanction or other administrative measure, publication of administrative sanctions or other administrative measures, key penalising powers and levels of administrative fines. Subject to strict professional secrecy, EIOPA should maintain a central database of all administrative sanctions or other administrative measures and information on the appeals reported to it by supervisory authorities and resolution authorities.