Changes from report parliamentary committee draft to plenary report

Added1. Member States shall ensure that resolution authorities have the necessary powers to apply the resolution tools to insurance and reinsurance undertakings and to entities referred to in Article 1(1), points (b) to (e), that meet the conditions for resolution referred to in Article 19(1) or Article 20(3).

Added2. Where a resolution authority decides to apply a resolution tool to an insurance or reinsurance undertaking or an entity referred to in Article 1(1), points (b) to (e), and that resolution action would result in losses being borne by creditors, in particular policy holders, or would result in their claims being restructured or converted, the resolution authority shall exercise the power to write down or convert capital instruments and eligible liabilities in accordance with Article 34 immediately before or together with the application of the resolution tool.

AddedThe conversion of eligible liabilities into capital instruments may be applied to insurance claims where the resolution authority is able to demonstrate that such measure ensures a better protection of policy holders compared to a write down of their claims.

Added3. The resolution tools referred to in paragraph 1 are the following:

Added(a) the solvent run-off tool;

Added(b) the sale of business tool;

Added(c) the bridge undertaking tool;

Added(d) the asset and liability separation tool;

Added(e) the write-down or conversion tool.

AddedSubject to paragraph 5, resolution authorities may apply the resolution tools individually or in any combination, except for the asset and liability separation tool, which may only be used together with another resolution tool.

Added4. Where only the sale of business and the bridge undertaking tool are used, and where those tools are used to transfer only part of the assets, rights or liabilities of the undertaking under resolution, the residual insurance or reinsurance undertaking or entity referred to in Article 1(1), points (b) to (e), from which the assets, rights or liabilities have been transferred, shall be wound up under normal insolvency proceedings. Such winding up shall be done within a reasonable timeframe, having regard to any need for that residual insurance or reinsurance undertaking or entity referred to in Article 1(1), points (b) to (e), to provide services or support pursuant to Article 43 to enable the recipient to carry out the activities or services acquired by virtue of that transfer, and any other reason that the continuation of the residual insurance or reinsurance undertaking or entity referred to in Article 1(1), points (b) to (e), is necessary to achieve the resolution objectives referred to in Article 18 or comply with the principles referred to in Article 22.

AddedWhere the solvent run-off tool is used and where the net asset value of the undertaking under resolution in solvent run-off has become negative, the residual insurance or reinsurance undertaking shall be wound up under normal insolvency proceedings.

Added5. The Member States shall ensure that a financing arrangement is in place to enable the fulfilment of the obligations deriving from this Directive. If a national insurance guarantee scheme is in place, Member States may use the existing administrative structures for this purpose. Financing arrangements shall not be used to directly absorb losses of an insurance undertaking or any entity referred to in Article 1(1), first subparagraph, points (b) to (e).

AddedThe financing arrangement shall at least have sufficient financial resources to cover the expenses arising from the compensation of policy holders as a consequence of Article 55 within a reasonable timeframe through an appropriate combination of ex-ante contributions and ex-post contributions. Contributions shall be risk based.

AddedThe financing arrangement may cover any reasonable expenses properly incurred in connection with the use of the resolution tools or exercising the resolution powers in one or more of the following ways:

Added(a) as a deduction from any consideration paid by a recipient to the undertaking under resolution or, as the case may be, to the owners of the shares or other instruments of ownership;

Added(b) from the undertaking under resolution, as a preferred creditor;

Added(c) from any proceeds generated as a result of the termination of the operation of the bridge undertaking, the asset and liability management vehicle or the insurance or reinsurance undertaking in solvent run-off, as a preferred creditor.

Added5a. Where the undertaking under resolution operates within the European Union under the freedom of establishement or the freedom to provide services, the financing arrangement of the Member State in which the undertaking is authorised shall be used for the purposes referred to in paragraph 5.

Added5b. Member States shall ensure that the use of a financing arrangement may be triggered by a designated public authority or an authority entrusted with public administrative powers.

Added5c. To the extent that the resolution action includes the use of a financing arrangement, Member States shall notify the Commission of its intended use.

Added5d. Where the financing arrangement relies on ex-ante contributions, Member States shall ensure that those funds are solely used for resolution purposes in line with this Article.

Added6. Member States shall ensure that rules of national insolvency law on the voidability or unenforceability of legal acts detrimental to creditors do not apply to transfers of assets, rights or liabilities from an undertaking under resolution to another entity by virtue of the application of a resolution tool or the exercise of a resolution power.

Added7. Member States may confer upon resolution authorities additional tools and powers exercisable where an insurance or reinsurance undertaking or entity referred to in Article 1(1), points (b) to (e), meets the conditions for resolution referred to in Article 19(1) or Article 20(3), provided that:

Added(a) when applied to a cross-border group, those additional tools and powers do not pose obstacles to effective group resolution;

Added(b) those tools and powers are consistent with the resolution objectives referred to in Article 18 and the general principles governing resolution laid down in Articles 18 and 22.

AddedThe solvent run-off tool

Added1. Member States shall ensure that supervisory authorities have the power to withdraw the authorisation of the undertaking under resolution to write new insurance or reinsurance contracts and place the undertaking under resolution in a solvent run-off procedure to terminate the activities of that undertaking.

Added2. Resolution authorities shall ensure that an insurance or reinsurance undertaking under resolution in a solvent run-off is capable of retaining adequately trained and competent staff to ensure the orderly continuation of its insurance activities in run-off until its liquidation.

Added3. Resolution authorities shall monitor, in close cooperation with supervisory authorities, the costs and expenses of an insurance or reinsurance undertaking under resolution to preserve its value and marketability.

Added4. Resolution authorities shall, in close cooperation with supervisory authorities, assess intended changes to the composition of assets, monitor closely reinsurance arrangements and require, at least on a quarterly basis, independent actuarial reviews of the technical provisions and reserves.

Added5. In application of the solvent run-off tool, resolution authorities shall restrict or prohibit any remuneration of equity and instruments treated as equity, including dividend payments, and shall restrict or prohibit any payments of variable remuneration and discretionary pension benefits.

Added6. Resolution authorities shall take a decision that an undertaking under resolution in solvent run-off has to be liquidated in any of the following cases, whichever occurs first:

Added(a) the undertaking under resolution in solvent run-off merges with another entity;

Added(b) all or substantially all of the assets, rights or liabilities of the undertaking under resolution in solvent run-off are sold to a third party purchaser;

Added(c) the assets of the undertaking under resolution in solvent run-off are completely wound down and its liabilities are completely discharged;

Added(d) the net asset value of the undertaking under resolution in solvent run-off has become negative.

Added7. Where the operations of an undertaking under resolution in solvent run-off are terminated in the circumstances referred to in paragraph 6, point (b), the residual insurance or reinsurance undertaking shall be wound up under normal insolvency proceedings.

AddedSubject to Article 26(6), any proceeds generated as a result of the termination of the operation of the insurance or reinsurance undertaking in run-off shall benefit its shareholders.

AddedSection 3 the asset and liability separation tool, the sale of business tool, and the bridge undertaking tool

AddedPrinciples for the application of the asset and liability separation tool, the sale of business tool, and the bridge undertaking tool

Added1. Member States shall ensure that, subject to Article 31, paragraphs 5 and 6 and Article 65 , resolution authorities have the power to use the asset and liability separation tool, the sale of business tool, and the bridge undertaking tool without obtaining the consent of the shareholders of the undertaking under resolution or any third party, other than the purchaser or the bridge undertaking, and without complying with any procedural requirements under company or securities law, other than those laid down in Article 29.

Added2. Subject to Article 26(7), any consideration paid by the purchaser or the bridge undertaking shall benefit:

Added(a) the owners of the shares or of other instruments of ownership, where such shares or such other instruments of ownership issued by the undertaking under resolution have been transferred from the holders of those shares or instruments to the purchaser or the bridge undertaking;

Added(b) the undertaking under resolution, where some or all of the assets or liabilities of the undertaking under resolution have been transferred to the purchaser or the bridge undertaking.

Added3. Subject to Article 26(7), any consideration paid by an asset and liability management vehicle as referred to in Article 30(2) in respect of the assets, rights or liabilities acquired directly from the undertaking under resolution shall benefit the undertaking under resolution. Consideration may be paid in the form of debt issued by the asset and liability management vehicle.

Added4. Transfers made by using the asset and liability tool, the sale of business tool or the bridge undertaking tool shall be subject to the safeguards referred to in Title III, Chapter V.

Added5. Resolution authorities may use the asset and liability separation tool, the sale of business tool and the bridge undertaking tool more than once to make supplemental transfers where necessary to achieve the resolution objectives referred to in Article 18.

Added6. Member States shall ensure that the purchaser or the bridge undertaking referred to in paragraph 1 may continue to exercise the rights of membership and access to, where relevant, payment, clearing and settlement systems, stock exchanges and insurance guarantee schemes of the undertaking under resolution, provided that it meets the membership and participation criteria for participation in such systems.

AddedIn cases where not all criteria listed in the first subparagraph are met, Member States shall ensure that:

Added(a) membership or participation in payment, clearing and settlement systems, stock exchanges and insurance guarantee schemes is not denied on the ground that the purchaser or the bridge undertaking does not possess a rating from a credit rating agency, or that such rating is not commensurate with the rating levels required to be granted access to such systems or schemes;

Added(b) where the purchaser or the bridge undertaking does not meet the membership or participation criteria of a payment, clearing or settlement system, stock exchange or insurance guarantee scheme, the rights referred to in the first subparagraph are exercised for a period of time specified by resolution authorities, not exceeding 24 months, and renewable on application by the purchaser or the bridge undertaking to the resolution authority.

Added7. Without prejudice to Title III, Chapter V, shareholders or creditors of the undertaking under resolution and other third parties whose assets, rights or liabilities are not transferred by using the asset and liability tool, the sale of business tool or the bridge undertaking tool, shall not have any rights or claims over or in relation to the assets, rights or liabilities transferred or over or in the administrative, management or supervisory body or senior management of the bridge undertaking or the assets and liabilities management vehicle.

AddedProcedural requirements regarding sales of business, assets, rights or liabilities in resolution

Added1. Subject to paragraph 3 of this Article, Member States shall ensure that, where resolution authorities seek to apply the sale of business tool, or sell a bridge undertaking, or its assets, rights or liabilities, the undertaking under resolution, the bridge undertaking or the assets, rights, liabilities, shares or other instruments of ownership concerned are marketed in accordance with the criteria set out in paragraph 2. Pools of rights, assets, and liabilities may be marketed separately.

Added2. Without prejudice to the Union State aid framework, where applicable, the marketing criteria referred to in paragraph 1 are the following:

Added(a) marketing shall be as transparent as possible and shall not materially misrepresent the assets, rights, liabilities, shares or other instruments of ownership of the undertaking or bridge undertaking that a resolution authority intends to transfer;

Added(b) marketing shall not unduly favour, or discriminate between, potential purchasers;

Added(c) marketing shall be free from any conflict of interest;

Added(d) marketing shall not confer any unfair advantage on a potential purchaser;