IRRD explained: the Insurance Recovery and Resolution Directive (EU) 2025/1 and the 30 January 2027 deadline

The Insurance Recovery and Resolution Directive, Directive (EU) 2025/1, answers a question Solvency II left open: what happens when an insurer fails. It was published in January 2025 and Member States must apply it from 30 January 2027. This post explains what the directive requires, which undertakings it catches, what a pre-emptive recovery plan has to contain and which Solvency II figures a reporting team can reuse for it. It ends with a list of things to do in 2026 and a short note on how IRRD Tool handles the data side. Article numbers refer to the final text; the full directive is in our regulation library as Directive (EU) 2025/1.

What IRRD is and why Solvency II needed it

Directive 2009/138/EC, Solvency II, is a going concern framework. It sets capital requirements, a ladder of supervisory intervention when the SCR or the MCR is breached, and a recovery plan duty under Article 138(2) once the SCR is breached. What it does not do is say how a failing insurer is taken apart. Insolvency law is national, and a cross-border group can end up in several proceedings at once. Recital 2 of IRRD says as much: Solvency II strengthened resilience but did not remove the possibility of failure, and recent cross-border failures exposed the weaknesses.

IRRD fills that gap. It follows the structure of the bank recovery and resolution directive (2014/59/EU) but is written for insurance: policyholders come first among the objectives, and the planning duties are scaled by market coverage instead of applying to every undertaking. Each Member State designates a resolution authority (Article 3), and EIOPA gets a Resolution Committee (Article 96).

Who is in scope and the coverage targets

Article 1 covers insurance and reinsurance undertakings within the scope of Solvency II, their parent undertakings, insurance and mixed financial holding companies, and third-country branches that meet the conditions in Articles 75 to 80. Being in scope does not mean every undertaking writes a plan. The directive works with coverage targets that national authorities have to reach.

For pre-emptive recovery plans, Article 5(2) tells supervisory authorities to select undertakings on the basis of size, business model, risk profile, interconnectedness, substitutability, importance for the national economy and cross-border activity. The selection must cover at least 60 percent of the Member State’s life insurance and reinsurance market, measured by gross technical provisions, and at least 60 percent of its non-life market, measured by gross written premiums.

For resolution plans, Article 9(2) sets the bar at 40 percent of each market on the same measures. Resolution authorities pick the undertakings whose failure is more likely to call for resolution in the public interest, or which perform a critical function.

Two rules connect the sets. Any undertaking with a resolution plan must also have a pre-emptive recovery plan (Article 5(3)). Small and non-complex undertakings are excluded from both unless the authority sees a particular risk at national or regional level. Article 4 also allows simplified obligations: less content, a lower update frequency and a later first plan. Groups plan at the level of the ultimate parent (Articles 7 and 10), and subsidiaries covered by a group plan count toward the national figures.

Whether a mid-sized insurer falls inside the 60 percent is the supervisor’s decision, taken with the criteria in EIOPA’s draft technical standard of February 2026. If you have not heard, ask.

The four building blocks

Preparation and prevention come first. Undertakings write pre-emptive recovery plans (Article 5), update them at least every two years and after any material change (Article 5(4)), have the management body approve them (Article 5(10)) and submit them to the supervisor, who reviews them within nine months (Article 6). Resolution authorities write resolution plans (Article 9), assess resolvability (Article 13) and can require an undertaking to remove impediments to resolvability (Article 15), for example by rewriting intra-group agreements or divesting assets.

Early intervention is the second block, and here the final text is easy to misread. IRRD has no separate early intervention chapter. It relies on the Solvency II ladder, which Directive (EU) 2025/2 amended in the same package: the Article 138 recovery plan after an SCR breach, the Article 139 finance scheme after an MCR breach and the preventive measures under Article 141. IRRD’s definition of a “crisis prevention measure” in Article 2(79) lists exactly those. Our post on what changes in Solvency II under Directive (EU) 2025/2 covers that side.

Resolution is the third block. Article 18 sets four objectives of equal weight: protecting policyholders, beneficiaries and claimants; maintaining financial stability; continuing critical functions; and protecting public funds. Resolution starts only when all three conditions in Article 19 are met: the undertaking is failing or likely to fail, no private or supervisory measure would prevent the failure in a reasonable time, and resolution is in the public interest. An MCR breach with no reasonable prospect of recovery counts as failing. Article 26(3) lists five tools: solvent run-off, sale of business, bridge undertaking, asset and liability separation (only together with another tool) and write-down or conversion.

Cross-border cooperation is the fourth. Group resolution authorities set up resolution colleges (Article 70), and home and host authorities exchange draft plans and can refer disagreements to EIOPA.

What a pre-emptive recovery plan must contain

Article 5(6) lists the content and EIOPA’s draft regulatory technical standard on the content of pre-emptive recovery plans (EIOPA-BoS-25-711, submitted to the Commission on 16 February 2026) expands each item into a section. The table maps the two and shows which Solvency II figures feed each part.

Two points in the directive text carry more weight than they look. The plan may not assume any extraordinary public financial support (Article 5(5)). And the indicators are not decorative: any SCR breach must lead to a remedial action in line with the plan, and an undertaking that acts on an indicator, or decides not to act when one has been met, must notify the supervisor without delay (Article 5(8) and 5(9)). So the indicators need a monitored data feed rather than a spreadsheet refreshed once a year.

Most of the quantitative content is what your SCR run already produces. If you use the standard formula, the module level outputs give you the risk reduction lever directly; how the SCR standard formula is calculated walks through the pieces.

Timeline: from publication to application

The directive gives no separate grace period for the first plan. From 30 January 2027 the requirement applies; the due date for your first plan comes from national transposition and the supervisor’s letter, and Article 4(1)(b) allows a later date only under simplified obligations. Assume 2027 until told otherwise.

What to prepare in 2026

Find out where you stand. Ask your supervisor whether you are inside the 60 percent for recovery planning and whether the resolution authority has you inside the 40 percent. The February 2026 RTS on selection criteria gives you their logic, so you can estimate your position from published market figures before the letter arrives.

Map Article 5(6) to documents you already have. The ORSA, the capital management policy, the liquidity plan, any Article 138 recovery plan from the last ten years and the group structure charts cover much of the description and governance sections. Write down what is missing.

Build the indicator set from figures you already report. The SCR ratio is a mandatory indicator; the MCR ratio, own funds by tier, liquidity and profitability are the obvious additions. EIOPA’s July 2026 guidelines on indicators set the expectations for thresholds and forward looking triggers. Once the thresholds are set, write down who is told when one is hit.

Make the data path repeatable. The plan needs figures on the same basis as your quarterly Solvency II numbers, and the indicators need monitoring between quarters. If your SCR, own funds and technical provisions come from three extracts stitched together by hand, fix that first; the plan has to be refreshed at least every two years and after any material change.

Quantify the remedial actions. For each one, estimate the effect on own funds, the SCR and liquidity, and re-run it under the severe scenarios in EIOPA’s July 2026 guidelines. The RTS asks about compatibility, so check that two capital actions do not depend on the same buyer or the same market window.

Settle governance early. Someone owns the plan, the management body approves it before submission, and if the supervisor finds material deficiencies a revised plan is due within two months. In a group the ultimate parent writes the plan, but your figures still flow into it, so agree the split of work now.

Where this lands in the software

IRRD Tool is a reporting tool, so it covers the data side of the plan rather than the strategy. It pulls data from several sources at once, whether that is a database, Excel files or CSV extracts, and feeds multiple sources into multiple templates. The transformations from source to template are defined once and reused quarter after quarter, which is what a plan updated every two years and monitored in between needs. The same integration that populates the reporting templates can populate the Solvency II figures in the table above, so the indicator values and the inputs to each remedial action come from one automated path instead of a hand-built extract. The narrative sections stay with the risk and actuarial team; the numbers behind them do not have to be rebuilt every time the plan is refreshed.