Insurers braced for far-reaching recovery and resolution requirements

For the past couple of years, insurers have watched at a safe distance banks struggling to learn their way around living wills. Only last month did they realise the extent to which they will be put through similar hardships. The Financial Stability Board proposes national authorities be given extended powers to resolve systemic insurers in extreme distress. This can mean restructuring liabilities and bailing-in creditors and other counterparties, including once-sacred policyholders. While resolution is a last-resort scenario, most firms will feel the rules bite. Hugo Coelho reports

On August 12, one month after the designation of global systemically important insurers (G-Siis), the Financial Stability Board (FSB), the body set up by the G-20 to coordinate global financial reform efforts in the post-financial crisis world, published guidance on extending the heightened resolution principles originally designed for too-big-to-fail banks to insurers.

The annex to the so-called Key Attributes on Effective Resolution paper, which is under consultation until October 15, makes