IRRD: cleversoft Explores Support for Insurers Under New EU Directive
About the Insurance Recovery and Resolution Directive (IRRD)
The Insurance Recovery and Resolution Directive (IRRD) is an EU directive that has been in force since January 28, 2025. The goal of this new regulatory framework is to harmonize the recovery and resolution of insurers across Europe – defining how companies prevent crises, stabilize operations, or undergo an orderly resolution.
The European Insurance and Occupational Pensions Authority (EIOPA) is responsible for the technical implementation and taxonomies. It is gradually publishing technical standards (RTS/ITS) and guidelines; the draft for the data taxonomy for reporting was released in July 2025.
Key Points and Industry Impact
The IRRD addresses the fragmented landscape of national insurance recovery and resolution rules across EU Member States. It introduces a harmonized approach to managing insurer distress and failure, with a strong focus on cross-border coordination, public interest protection, and financial stability. The IRRD introduces planning and reporting obligations that closely mirror the structure and rigor of Solvency II.
For insurers, this specifically means they must prepare preventive recovery plans, which need to be updated every two years. These plans should clearly outline which stress scenarios could threaten the company and what countermeasures are in place. Supervisory authorities require these plans for a large part of the market.
In addition, the IRRD mandates an annual, highly structured resolution report based on QRT templates in XBRL, providing authorities with the basis for creating resolution plans.
cleversoft is currently developing a solution to help insurers meet these new requirements. Below are the key requirements and milestones:
1. Pre-emptive Recovery Plans Pre-emptive recovery plans are developed during normal business operations and are mandatory for those specific insurers identified by supervisory authorities. These plans must be in place for at least 60% of the market in each Member State, based on criteria such as size, business model, and interconnectedness.
Industry Impact: Member state regulators will appoint insurance companies to fall under this reporting and appointed insurers must prepare detailed recovery plans during normal operations, increasing the need for structured data and scenario planning.
2. XBRL Resolution Reporting & Plan
Resolution plans are designed for situations where an insurer is no longer viable and cannot recover through private or supervisory measures. These plans are managed by Resolution Authorities and must cover at least 40% of the market in each Member State, focusing on entities with significant risk profiles or cross-border activities. The EIOPA working draft is published and the format will be XBRL, however submissions deadlines will still need to be clarified.
Industry Impact: Member state regulators will appoint insurance companies to fall under this reporting whom will need to provide extensive information and cooperate with authorities, especially in cross-border contexts to enable the regulator to establish a resolution plan.
3. Resolution Tools
The IRRD introduces several resolution tools, including write-downs, conversions, bridge institutions, asset and liability separation, and sale of business. These tools aim to ensure continuity of critical functions and protect policyholders but may involve restructuring measures such as converting liabilities into equity.
Industry Impact: Insurers must prepare for potential restructuring scenarios and ensure data transparency.
4. Safeguards
The directive includes safeguards such as independent or provisional valuation, the “no creditor worse off than in liquidation” (NCWO) principle, and the right to appeal. These measures are designed to protect stakeholders and ensure fairness in resolution outcomes.
Industry Impact: Legal and operational safeguards require insurers to maintain robust documentation and valuation capabilities.
5. Coordination Structures
The IRRD mandates the creation of Resolution Colleges and a Resolution Committee within EIOPA to coordinate resolution efforts across Member States. These structures aim to prevent conflicts of interest and promote convergence in resolution practices.
Industry Impact: Insurers operating in multiple jurisdictions must align with new coordination protocols.
6. Funding Mechanisms
Each Member State must establish financing arrangements to support resolution activities, which may be linked to existing Insurance Guarantee Schemes (IGS). Funding can be raised ex-ante, ex-post, or through a combination of both.
Industry Impact: Financial planning and risk buffers will become more critical.
Upcoming Milestones
cleversoft is going to support insurers on the first IRRD reporting in 2028
The IRRD introduces planning and reporting obligations that closely mirror the structure and rigor of Solvency II, hence it is important to start your preparation with cleversoft. More concrete updates on cleversoft IRRD service offerings will follow shortly. If you’re interested, just get in touch to learn more.