Recital 48

(48) Financing arrangements should be established in each Member State to compensate policy holders, beneficiaries and claimants of insurance and reinsurance undertakings authorised in that Member State. Financing arrangements should be available to satisfy claims of shareholders and other creditors under the ‘no creditor worse off’ principle if that is necessary to avoid reliance on public funds. Those claims should be calculated in accordance with the creditor hierarchy in normal insolvency proceedings in order to prevent shareholders or other creditors from being compensated before policy holders, beneficiaries or claimants are fully compensated. While directly absorbing the losses of an insurance company should be avoided, it should be possible to use such financing arrangements to finance other costs associated with the use of resolution tools as a last resort, to the extent necessary to achieve the resolution objectives and insofar as the resolution principles are fully respected. Member States should be able to decide that financing arrangements could be used to absorb losses of policy holders, beneficiaries and claimants. In such a case, the failing undertaking would exit the market and all or part of the portfolios of insurance contracts would be transferred as part of the sale-of-business tool or to a bridge undertaking, or maintained in the undertaking under resolution if it is placed in solvent run-off. In any case, shareholders should have been written down before resolution financing arrangements could be used to absorb losses. Acknowledging the diversity in insurance markets, Member States should be given some flexibility in relation to the precise arrangements of external financing as long as the availability of sufficient liquidity to guarantee compensation within a reasonable timeframe is ensured. A Member State should impose a contribution obligation only to insurance and reinsurance undertakings authorised in that Member State and to Union branches of a third-country undertaking which are established in its territory.

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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.