Recital 39

(39) The write-down or conversion of capital instruments, debt instruments and other eligible liabilities should provide for an internal loss-absorption mechanism. That mechanism, combined with transfer tools aimed at maintaining continuity of insurance coverage for the benefit of policy holders, beneficiaries and injured parties, should allow for the achievement of the resolution objectives and should limit to a great extent the impact of a failure of an insurance or reinsurance undertaking on policy holders. There could be extreme cases, however, where the resolution of an insurance or reinsurance undertaking requires the intervention of specific national schemes, in particular an insurance guarantee scheme or a resolution fund, to provide for complementary loss-absorbing and restructuring resources or, as a last resort, extraordinary public financing. The safeguards necessary to protect creditors should also reflect the existence of such specific national schemes, which in turn have to comply with the Union State aid framework. The write-down or conversion tool should be applied before the use of any extraordinary public financial support.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-14 · Text as adopted (Official Journal); later amendments are not incorporated in this text.