The European Union has introduced significant new measures aimed at enhancing the resilience of the insurance and reinsurance sectors, while providing better protection for businesses and policyholders. The revisions primarily impact two key directives: the Solvency II Directive and the IRDD Directive.

Solvency II Directive Revision (Directive 2025/2)
Key Changes
The revision of this directive seeks to modernize the rules to better align with current economic realities and simplify administrative processes. The main changes include:
Capital Requirements Adjustment: This will allow insurers more flexibility to invest in long-term projects, such as green and digital initiatives.
Proportionality: Insurance company oversight will be better tailored based on their size, complexity, and scope, reducing the administrative burden on small and medium-sized enterprises (SMEs).
Reduction of Communication Burden: This will simplify information management and transparency, which is crucial for insurers.
IRDD Directive (Directive 2025/1)
Objective
The IRDD Directive establishes a harmonized framework for the recovery and resolution of insurance and reinsurance companies facing financial difficulties. It aims to facilitate and expedite the handling of insurer bankruptcies while protecting financial stability and the interests of policyholders.
Key Provisions
Resolution Authorities: Each member state will designate competent authorities to develop resolution plans for insurance or reinsurance companies in bankruptcy. These authorities will cooperate with the EIOPA (European Insurance and Occupational Pensions Authority).
Resolution Plans: Insurance companies must have recovery plans outlining the measures they will take to restore financial stability in case of difficulties.
Resolution Instruments: Uniform procedures will be established, such as the sale of businesses, the creation of bridge institutions, or the transfer of assets and liabilities.
Protection of Policyholders: Measures will ensure the continuity of insurance coverage during the resolution process, minimizing negative impacts on policyholders.
Impact for Businesses and Policyholders
The reforms introduced by these directives aim to bolster the stability of the insurance sector while ensuring that policyholders continue to receive strong protections in the event of financial difficulties faced by insurance companies. These new rules will come into effect in January 2025, with full implementation expected by 2027. Businesses will need to revise their risk management practices, transparency, and foresight to better anticipate and manage financial crises.
Legislation:
- Directive (UE) n° 2025/1 du Parlement européen et du Conseil du 27 novembre 2024 établissant un cadre pour le redressement et la résolution des entreprises d’assurance et de réassurance, et modifiant les directives 2002/47/CE, 2004/25/CE, 2007/36/CE, 2014/59/UE et (UE) 2017/1132 et les règlements (UE) n° 1094/2010, (UE) n° 648/2012, (UE) n° 806/2014 et (UE) 2017/1129
- Directive (UE) n° 2025/2 du Parlement européen et du Conseil du 27 novembre 2024 modifiant la directive 2009/138/CE en ce qui concerne la proportionnalité, la qualité du contrôle, la communication d’informations, les mesures relatives aux garanties à long terme, les outils macroprudentiels, les risques en matière de durabilité et le contrôle de groupe et le contrôle transfrontière, et modifiant les directives 2002/87/CE et 2013/34/UE