Pre-emptive recovery planning for insurers

Recovery and resolution planning has been a hot topic for the Insurance industry in recent years.

What is resolution and recovery planning?

A recovery plan identifies options to restore financial strength when a company comes under severe stress. Recovery plans are a natural extension of companies’ financial projections, stress/scenario testing and general risk management.

Insurers are responsible for producing their own pre-emptive Recovery Plans in line with the new regulations.

A resolution plan is a comprehensive document which details the characteristics of an institution and describes the preferred resolution strategy for that institution, including which resolution tools to apply. In Ireland the CBI is required as national resolution authority (NRA) to undertake resolution planning. 

What does it mean for (re)insurers?

(Re)insurers are now required to:

• Prepare a pre-emptive recovery plan addressing the following areas:
  • governance for recovery planning and utilisation of the plan itself.
  • a description of the (re)insurer.
  • a menu of recovery options.
  • a trigger framework.
  • a set of stress scenarios (to test the recovery options a trigger framework).
  • a communication strategy and any required preparatory measures.

• Review and, if necessary, update the recovery plan at least every 12 months for High and Medium-High impact firms and at least every 24 months for Medium-Low and Low impact firms or after any material change to the legal or organisational structure of the (re)insurer, its business or its financial position.

• Provide a copy of the recovery plan to the CBI on request.

The deadline for the preparation of initial recovery plans was 31 March 2022.

Survey of Industry Practice – Summer 2022

For a comprehensive insight into industry practice in relation to pre-emptive recovery planning, see our Industry benchmarking survey

Useful Links

SI No184 of 2021 

CBI

How can Mazars help?

Mazars have considerable experience in insurance risk management and thorough familiarity with the requirements and the regulatory expectations. We are available to aid you in developing your recovery plan and aligning it to your existing risk management strategies. 

Our approach to recovery planning is specific to each clients’ needs, and may include the following key phases:

1. Strategic analysis of the entity – workshops with management and review of existing risk profile and management system.
2. Gap analysis of existing documentation vs regulatory requirements.
3. Development of content in relation to key topics (strategic analysis, recovery indicators, recovery options, scenario analysis) through an iterative and multipronged approach.
4. Assistance with scenario development and calibration.
5. Feasibility assessments of preferred recovery options.
6. Consolidation of information and content for remaining elements (e.g. Governance, Communication planning) of the plan.
7. Review and refinement of the overall plan for submission to regulator.