The European Insurance and Occupational Pensions Authority has submitted technical advice to the European Commission regarding minimum common standards for insurance guarantee schemes across the European Union. The submission outlines targeted harmonisation rules to enhance consumer protection while maintaining necessary national flexibility.
Addressing Fragmentation in Policyholder Protection
The existing environment for insurance guarantee schemes across the European Union is marked by a fragmented collection of national frameworks that differ significantly in scope, coverage, and existence. Consequently, policyholders experience inconsistent outcomes when an insurance firm fails, depending on their country of residence or whether their policy was acquired on a cross-border basis.
To resolve these disparities, the technical advice builds upon the authority's earlier opinion from the 2020 Solvency II review. It advocates for targeted and proportionate harmonisation to deliver clearer protection for consumers, support the Single Market, and reinforce the Savings and Investment Union framework.
Core Recommendations for Scope, Operations and Insolvency
The advice targets life and non-life insurance products whose failure would cause substantial financial hardship for policyholders. Particular focus is given to cross-border business arrangements where aligned rules directly support the functioning of the internal market.
In terms of operational design, the authority recommends establishing common trigger points for activating protection schemes to increase predictability and equal treatment. The proposal introduces uniform timeframes for filing claims alongside maximum payout periods, while allowing individual member states to implement shorter payout windows if desired. Additionally, protection schemes would receive the same preferential ranking in insolvency proceedings as insurance claims within each jurisdiction.
Funding Provisions and Resolution Alignment
On funding mechanisms, the proposal sets out minimum liquidity requirements to ensure schemes hold sufficient financial backing, while leaving member states room to determine the precise funding structures that fit local market conditions.
Addressing the Insurance Recovery and Resolution Directive framework, the document outlines key principles for cooperation. Given ongoing national implementation of the directive, the advice mandates formal cooperation standards between national resolution authorities and insurance guarantee schemes.
Frequently Asked Questions
What is the main goal of EIOPA's technical advice on insurance guarantee schemes?
The main goal is to establish minimum common standards across national insurance guarantee schemes to reduce fragmentation, ensure predictable outcomes for policyholders during insurer failures, and strengthen cross-border protection within the European Union.
How does the advice address cross-border insurance policies?
The advice targets life and non-life products that pose significant financial risk and are frequently sold across borders, ensuring consistent protection levels regardless of where the insurer or policyholder is located.
What is the next step in the legislative process?
This advice is a technical precursor. The European Commission will use it to prepare a report for the European Parliament and Council under Article 98 of the Insurance Recovery and Resolution Directive prior to drafting a legislative proposal.
