Resolution planning for insurers
Preparation is very important to deal with a crisis effectively. At De Nederlandsche Bank (DNB), we determine in advance how we will intervene if an insurer is likely to fail. This is known as resolution planning.
Due care – the resolution plan
We first determine whether an insurer actually qualifies for resolution. We do this by conducting a “public interest test,” in which we analyse whether a specific insurer's bankruptcy would have an unduly negative impact on the financial markets, the economy or society. We then assess whether resolution or bankruptcy is the best solution to minimise such negative impact . If the specific insurer qualifies for resolution, we draw up a resolution plan setting out the following matters:
- Resolution strategy: This describes the results of the public interest test and states why the insurer qualifies for resolution. It also states which resolution tools we will use in the event of failure.
- Continuity: An insurer’s operational and financial continuity is crucial for us to be able to implement the resolution strategy. The resolution plan analyses what is required to safeguard continuity, for example, which ICT systems must continue to operate.
- Obstacles to resolution: We assess whether a resolution plan is feasible in practice and whether there are any obstacles. If there are, we ask the insurer to remove them. Examples of obstacles include complex financial structures between various insurance entities and the use of ICT systems within an insurance group. Our approach is based on proportionality.
We contact an insurer before we draw up its resolution plan to request the information we need. Once we have finished the plan, we share the overall conclusions with the insurer.
Resolution planning – not for all insurers
DNB only draws up resolution plans for insurers that qualify for resolution, so most insurers do not have one. We inform all insurers about whether or not they qualify.