Recovery and Resolution (Insurance Firms) Bill to be sent to Council of State
The cabinet has approved the Recovery and Resolution (Insurance Firms) Bill proposed by the Minister of Finance Jeroen Dijsselbloem and the Minister of Security and Justice Ard van der Steur. In order to deal effectively with failing insurance firms in the future, the bill seeks to strengthen the available intervention tools. The bill will amend the statutory framework and give De Nederlandsche Bank (DNB, the Dutch central bank) new tools and powers to intervene if an insurance firm or group gets into difficulties.
Under the new rules, almost all insurance firms will be required to draw up plans setting out what measures they can and will take if their financial position deteriorates substantially. DNB will draw up resolution plans for large insurers in which it will determine the resolution strategy, identify impediments to resolution and, if need be, remove those impediments. As a result, DNB will be better able to isolate parts of a failing firm’s business, such as its insurance portfolio, and transfer them to a bridge insurance firm or another party.
The bill extends any necessary bail-in, under which losses are absorbed, to all creditors. Shareholders and all other creditors will have to bear losses first, before any policyholders have to do so. This means policyholders will be better protected. The bill also expressly provides that creditors, and hence policyholders too, must be better off after resolution than they would have been if DNB had not intervened and the firm had gone bankrupt. Improved protection for policyholders is one of the key aims of the bill.
Besides altering DNB’s intervention tools, the bill will amend the bankruptcy procedure for insurers. As preferential creditors, policyholders can claim almost all the insurance firm’s assets, but under current legislation they have to wait a relatively long time for payment. This can lead to major problems. The bill enables the liquidator of a bankrupt insurer, immediately after the bankruptcy adjudication has been issued, to give policyholders an advance on their payment from the estate. Here too, the aim is to better protect policyholders’ interests.
The bill was put out for consultation earlier this year. The cabinet has now agreed to submit the bill to the Council of State for an advisory opinion. The bill and the advisory opinion will be published when they are presented to the House of Representatives. It is expected that it will be possible to present the bill to the House of Representatives before the summer of 2017.