Resolution of insurers
DNB is responsible for the resolution of insurers. Resolution is the careful and controlled winding up of an insurer that fails or is at risk of failing.
The failure of an insurer could have a major impact on society, the economy and policyholders. The government may have to step in with taxpayers’ money. If any of these risks materialises, DNB takes action as the resolution authority. We take the insurer into resolution. This means we ensure that the insurance policies remain in force, by enabling the insurer to continue its activities or by selling the policies to another party. If there are no such risks, DNB will allow an insurer to go bankrupt.
Resolution is the last resort. As a supervisory authority, DNB will of course try to prevent an insurer getting into difficulty. If it does get into difficulty, however, DNB will seek to bring about its recovery, for example by ensuring that it restores its own funds to the required level. If the insurer is unable to do so on its own, DNB will take over the task in its capacity as the resolution authority.
When does an insurer go into resolution?
DNB opts for resolution only if the bankruptcy of an insurer would have undue social and financial impact. In assessing the impact we consider various aspects, including:
- size of the insurer
- number of policyholders
- type of insurance
- interconnectedness of the insurer with the financial system
- economic situation
In practice, this means that in most cases the insurer will not qualify for resolution and DNB will apply to have it declared bankrupt, either due to its limited size or because it offers products which the consumer can easily replace. Generally speaking, resolution is an option mainly in the case of larger insurers with long-term insurance liabilities, such as life insurers.
Preparation and tools
Successful resolution requires proper preparation. DNB therefore draws up a resolution plan. Link naar pagina resolutieplanning This sets out what we will do if the insurer gets into difficulty. To wind up an insurer, DNB has four resolution tools at its disposal Link naar pagina resolutie-instrumenten: bail-in, transfer, bridge institution and asset and liability management vehicle.
An insurer's deficits are for the account of shareholders and creditors. In the case of large deficits, policyholders may also lose some of the value of their insurance policies. Obviously, we will do our best to prevent this from happening. Unlike in the case of banks, there is no guarantee scheme for customers of failing insurers, but a policyholder will never be worse off as a result of resolution than as a result of bankruptcy.
The resolution costs can be passed on to the insurance sector retrospectively. These may include costs for engaging the services of independent experts. DNB also passes the costs of resolution planning on to the insurance sector.
Our main duties and powers in the field of resolution are laid down in the Act on the recovery and resolution of insurers (Wet herstel en afwikkeling van verzekeraars), This came into force on 1 January 2019. Whereas bank resolution is based on European legislation and has therefore been implemented in all EU countries, the same is not true of insurers. DNB advocates minimum harmonisation in this area at European level.
DNB's resolution task is independent of its supervisory duties, which is why Resolution is a separate division with a separate budget. One member of DNB's Governing Board, Nicole Stolk, is responsible for resolution. She has no direct responsibility for the supervision of insurers.
DNB has compiled a Resolution Compendium, where you will find more information on the resolution of banks and insurers, including resolution planning.