Pre-emptive recovery plans under IRRD: contents, indicators and the Solvency II data you can reuse

A pre-emptive recovery plan is the first document most insurers will produce under the Insurance Recovery and Resolution Directive, and the one the board signs. Article 5 of Directive (EU) 2025/1 lists what it must contain and EIOPA’s draft regulatory technical standard of February 2026 turns each item into a section. This post goes into the plan itself: who has to write one, the seven required elements and what a reporting team delivers for each, the indicator framework, which Solvency II figures feed which section, the review cycle and group plans. It ends with how to assemble the quantitative parts from the pillar 1 and ORSA outputs you already have, and where IRRD Tool fits. For the background on the directive, read IRRD explained first; the full text is in our library as Directive (EU) 2025/1.

Who has to write a plan

Article 5(1) puts the duty on insurance and reinsurance undertakings that are not covered by a group plan under Article 7 and that meet the criteria in Article 5(2) or 5(3). The supervisory authority selects undertakings on size, business model, risk profile, interconnectedness, importance for the national economy and cross-border activity, until at least 60 percent of the national life market (by gross technical provisions) and 60 percent of the non-life market (by gross written premiums) are subject to recovery planning. Subsidiaries of a group whose ultimate parent writes a group plan count toward those figures.

Article 5(3) adds two rules: any undertaking with a resolution plan must also have a recovery plan, and small and non-complex undertakings are out unless the supervisor considers them a particular risk at national or regional level. Article 4 lets supervisors apply simplified obligations to the content, the first due date and the update frequency.

The plan is part of the system of governance under Article 41 of Directive 2009/138/EC, so the risk management function and the management body own it. Article 5(5) rules out one shortcut: the plan may not assume extraordinary public financial support.

The seven required elements of Article 5(6)

Article 5(6) lists items (a) to (g) and the draft RTS (EIOPA-BoS-25-711, submitted to the Commission on 16 February 2026) gives each one an article. Article 1 of the RTS lets supervisors accept cross references to information already submitted, such as the ORSA report, which matters for a team that would otherwise copy the same tables twice.

(a) A summary of the key elements and of material changes since the last plan (RTS Article 2). The reporting team supplies the SCR and MCR ratios, eligible own funds by tier and the balance sheet movements.

(b) A description of the undertaking or group (RTS Article 3): business model, core business lines, legal and financial structure, intra-group and external exposures, reinsurance. The figures are premiums and technical provisions by line of business, reinsurance recoverables and the largest exposures, all in the annual QRTs.

(c) A framework of indicators (RTS Article 4), covered in the next section.

(d) How the plan was drawn up, will be updated and will be applied (RTS Article 5): who is responsible for each section, the approval date, the update triggers and the escalation process when an indicator is hit. It has no figures in it, but it commits the reporting team to a refresh cadence and a monitoring frequency.

(e) A range of remedial actions (RTS Article 6): recapitalisation, access to liquidity, reduction of the risk profile and the SCR, including divestments, and voluntary restructuring of liabilities. For each action the plan gives the impact on solvency, liquidity and capital composition under stress, the assumptions, the impediments, the timeframe and the compatibility with other actions taken in the same period. Here the reporting team does most of the work: every action needs a before and after view of own funds, the SCR by module, technical provisions and liquidity under the Article 5(7) scenarios.

(f) A communication strategy (RTS Article 7): internal and external communication, and when the use of a remedial action is disclosed. This section is written rather than calculated.

(g) Any SCR breach in the last ten years (RTS Article 8): the Article 138(2) recovery plan filed at the time and an assessment of the measures taken. The reporting team needs the SCR ratio series over that period and the historic filing.

Article 5(7) sits over all of these: the indicators and the remedial actions must be tested against a range of severe macroeconomic and financial stress scenarios, system-wide and idiosyncratic and in combination. EIOPA’s guidelines on scenarios of 8 July 2026 set out what that range should contain.

The indicator framework

Article 5(8) requires qualitative and quantitative indicators that identify the points at which remedial actions should be considered or taken. The directive names the categories they may cover: capital, liquidity, asset quality, profitability, market conditions, macroeconomic conditions and operational events, and EIOPA’s guidelines on indicators of 8 July 2026 use the same list. One indicator is mandatory: any breach of the SCR must be a capital indicator, and any breach must lead to remedial action in line with the plan.

RTS Article 4 adds four requirements: a forward looking element where possible, consistency with the general risk management framework, a rationale for each indicator and trigger, and enough lead time for the management body to evaluate the stress, decide and act, which argues for amber thresholds well above the SCR breach itself.

Article 5(8) also requires arrangements for regular monitoring, so the values are refreshed between the two-yearly updates on a frequency the plan states. Article 5(9) requires the undertaking to notify the supervisor without delay when it decides to take a remedial action, or decides not to act although an indicator has been met. The monitoring therefore has to record when each threshold was crossed and what was decided.

Which Solvency II data feeds each section

Most of the quantitative content is data the undertaking already reports. The table uses the solo annual template codes; group plans use the group equivalents.

Two things are not in the QRTs. Liquidity has no dedicated Solvency II template, so the ORSA cash flow projections and the liquidity plan carry it. And the stress results for the remedial actions are a rerun of the capital model, not a template cell; the post on how the SCR standard formula is calculated shows which module outputs a risk reduction action would change. A plan whose SCR ratio differs from the latest S.25.01 without explanation is the kind of deficiency Article 6 was written for.

The update cycle and the supervisory assessment

Article 5(4) sets the rhythm: an update at least every two years, and in any case after a material change to the structure, the business or the financial position, or as soon as one becomes foreseeable. Under Article 4 the supervisor can grant a lower frequency to undertakings under simplified obligations.

Before submission the management body assesses and approves the plan (Article 5(10)). Then Article 6 takes over. The supervisor has nine months to review the plan against three tests: whether the arrangements are reasonably likely to restore viability within an appropriate timeframe, whether the options can be implemented quickly under stress, and whether the plan avoids a significant adverse effect on the financial system, including where other insurers act on their plans in the same period.

If the supervisor finds material deficiencies, Article 6(4) gives the undertaking two months to submit a revised plan, extendable by one month on request; if that still falls short, Article 6(5) lets the supervisor require changes to the business. Two months is not long to rebuild the quantitative sections.

Group plans versus solo plans

Under Article 7 the group supervisor can require the ultimate parent to submit a group pre-emptive recovery plan. It is one plan, but it must identify remedial actions and indicators at the level of the parent and of each subsidiary, and it must say whether there are practical or legal impediments to moving own funds or repaying liabilities between entities (Article 7(3)). A subsidiary covered by a group plan does not write its own, unless no group plan exists (Article 7(4)) or its supervisor finds the group plan does not consider that entity sufficiently and, after a revised group plan, still requires a separate one (Article 7(5)). The management body of the submitting entity approves the plan (Article 7(7)). For the reporting team the difference is consolidation: group SCR and own funds from the group templates, plus entity level figures for each material subsidiary on the same basis and reference date.

Build it from your existing pillar 1 and ORSA outputs

The directive applies from 30 January 2027 with no separate grace period for the first plan, so assemble the quantitative sections from what exists. Start with the latest annual QRT set: the summary, the description and the capital indicators come straight from S.02.01, S.05.01, S.23.01, S.25.01 and S.28.01, with S.12.01 or S.17.01 for the technical provisions. Take the values as filed, with the reference date, so the plan and the submission agree. Take the liquidity figures from the ORSA and the liquidity risk management plan; if the cash flow projections are not yet on a stressed basis, that is the first gap to close.

Set the indicator thresholds from the risk appetite statement, not the other way round, and record a rationale for each. Reuse the ORSA scenarios for the Article 5(7) test and extend them where EIOPA’s July 2026 guidelines on scenarios ask for events the ORSA does not cover; each remedial action is then a before and after run of own funds, the SCR by module and liquidity, with and without the action. Finally, write down the monitoring frequency and the data path. If the indicator values come from the same extraction as the quarterly QRTs, the plan and the reporting stay consistent without a separate reconciliation.

Where this lands in the software

IRRD Tool covers the data side of the plan rather than the narrative. It pulls data from several sources at once, whether databases, Excel files or CSV extracts, feeds multiple sources into multiple templates and keeps the transformations defined once for reuse quarter after quarter, which is what the indicator monitoring and the two-yearly refresh need. The capital figures come from SCR Tool, which presents the SCR in the same format as the QRTs and lets you drill into any component of the calculation, so the before and after view of a risk reduction action can be traced module by module. The technical provisions behind S.17.01 and S.28.01 come from TP Tool, which populates those templates from the reserving results, so the plan uses the same reserves as the submission.