FSB clarifies resolution planning scope for insurers
The Financial Stability Board (FSB) has issued final guidance clarifying which insurers are subject to recovery and resolution planning (RRP) requirements. The guidance provides a structured approach for authorities to assess systemic significance based on six key criteria.
Six criteria for systemic assessment
The guidance offers a structured approach for authorities to assess which insurers should be subject to RRP requirements based on clearly defined criteria.
It outlines six key criteria—nature, scale, complexity, substitutability, cross-border activities, and interconnectedness—that authorities should consider.
The report also provides explanatory comments and examples of indicators to assist in applying these criteria.
This approach aims to balance consistency across jurisdictions with flexibility for differences in market structures, legal frameworks, and supervisory practices.
By addressing firm-specific risks and broader sectoral considerations, the guidance supports authorities in mitigating potential disruptions to the financial system and real economy from insurer stress or failure.
The document does not create a new standard or revise the Key Attributes but clarifies existing language, reflecting public feedback from a November 2025 consultation.
Mandatory RRP for critical functions
The FSB's Key Attributes of Effective Resolution Regimes, adopted in 2011 and revised in 2024, require RRP for insurers that could be systemically significant or critical upon failure.
This final report identifies specific circumstances where RRP requirements should always apply, regardless of the six criteria assessment.
These include when an insurer provides a critical function to third parties that, if suddenly failed, would materially impact the financial system or real economy and cannot be substituted quickly or affordably.
Additionally, RRP is mandatory if an insurer's failure would significantly affect a large number of policyholders or cause systemic disruption or a loss of general confidence in the insurance or financial sector.
The guidance aligns with the IAIS Insurance Core Principles, ensuring consistency in application.
Clarity, not a new standard
This final guidance provides much-needed clarity for national authorities navigating complex resolution planning.
While it avoids creating new standards, its structured approach and explicit criteria will streamline assessments and enhance consistency.
The emphasis on critical functions ensures a robust safety net, making the financial system more resilient against potential insurer failures.