European insurance guarantee schemes

An insurance guarantee scheme is a system ensuring that if an insurer fails, other insurers step in to compensate policyholders for their losses. The Insurance Recovery and Resolution Directive (IRRD) requires the European Commission to assess the appropriateness of minimum common standards for insurance guarantee schemes (IGS) in the EU.

• The need for a common guarantee scheme is the greatest when insurance forms part of a national social security system or complements state-funded statutory social security, statutory or occupational pension schemes or the public healthcare system. For this reason, the need for IGS cannot be uniformly defined at the EU level. This makes the establishment of a European IGS not only very difficult but also highly inefficient. It would not support the development of the European single market.
• Member states should be allowed to continue to determine the need for and scope of their national insurance guarantee schemes, allowing them to flexibly choose a model that best suits their needs.
• Moreover, current regulation already protects insurance policyholders. The Solvency II and the IRRD make insolvency highly unlikely. Even if an insurer does go bankrupt and the worst-case scenario takes place, policyholders will only lose a small part of the claims owed to them thanks to the solvency and resolution regulation, effective supervision and the high ranking of policyholder claims in the creditor hierarchy.