Public

Application Paper on
Recovery Planning

18 November 2019

PublicApplication Paper on Recovery Planning
November 2019

Page 1 of 24

About the IAISThe International Association of Insurance Supervisors (IAIS) is a voluntary membershiporganisation of insurance supervisors and regulators from more than 200 jurisdictions. The
mission of the IAIS is to promote effective and globally consistent supervision of the insurance
industry in order to develop and maintain fair, safe and stable insurance markets for the benefit
and protection of policyholders and to contribute to global financial stability.
Established in 1994, the IAIS is the international standard setting body responsible fordeveloping principles, standards and other supporting material for the supervision of theinsurance sector and assisting in their implementation. The IAIS also provides a forum forMembers to share their experiences and understanding of insurance supervision andinsurance markets.
The IAIS coordinates its work with other international financial policymakers and associationsof supervisors or regulators, and assists in shaping financial systems globally. In particular,
the IAIS is a member of the Financial Stability Board (FSB), member of the Standards Advisory
Council of the International Accounting Standards Board (IASB), and partner in the Access to
Insurance Initiative (A2ii). In recognition of its collective expertise, the IAIS also is routinely
called upon by the G20 leaders and other international standard setting bodies for input on
insurance issues as well as on issues related to the regulation and supervision of the global
financial sector.
Application Papers provide additional material related to one or more ICPs, ComFrame or
G-SII policy measures, including actual examples or case studies that help practicalapplication of supervisory material. Application Papers could be provided in circumstanceswhere the practical application of principles and standards may vary or where theirinterpretation and implementation may pose challenges. Application Papers can provide
further advice, illustrations, recommendations or examples of good practice to supervisors on
how supervisory material may be implemented.
International Association of Insurance Supervisors
c/o Bank for International Settlements
CH-4002 Basel
Switzerland
Tel: +41 61 280 8090 Fax: +41 61 280 9151
www.iaisweb.org
This document is available on the IAIS website (www.iaisweb.org).
© International Association of Insurance Supervisors (IAIS), 2019.
All rights reserved. Brief excerpts may be reproduced or translated provided the source isstated.

PublicApplication Paper on Recovery Planning
November 2019

Page 2 of 24

Contents
Acronyms .............................................................................................................................. 4
1

Introduction .................................................................................................................... 5
1.1

Purpose .................................................................................................................. 5

1.2

Scope ..................................................................................................................... 6

1.3

Inputs for the Application Paper .............................................................................. 6

1.4

Structure of the Application Paper........................................................................... 6

2

Objectives and concepts of recovery planning ............................................................... 7

3

Scope of application and proportionality ......................................................................... 8

4

5

6

3.1

Proportional application of requirements ................................................................. 9

3.2

Matters specific to insurance groups ..................................................................... 10

Governance ................................................................................................................. 11
4.1

Governance – development, approval, review and testing .................................... 11

4.2

Governance – monitoring, escalation and activation processes ............................ 13

Elements of a recovery plan ......................................................................................... 14
5.1

Executive abstract of the recovery plan................................................................. 14

5.2

Description of the insurer or group ........................................................................ 15

5.3

Trigger framework ................................................................................................. 15

5.4

Governance .......................................................................................................... 17

5.5

Recovery options .................................................................................................. 17

5.6

Communication strategy ....................................................................................... 19

5.7

Stress scenarios ................................................................................................... 20

Supervisory considerations .......................................................................................... 22
6.1

Assessing recovery plans ..................................................................................... 22

6.2

Supervisory cooperation and coordination ............................................................ 23

PublicApplication Paper on Recovery Planning
November 2019

Page 3 of 24

Acronyms
ComFrame
CDS

Common Framework for the Supervision of Internationally Active InsuranceGroupsCredit default swap

CMG

Crisis Management GroupERM

Enterprise Risk Management

FSB

Financial Stability Board

G-SIFI

Global Systemically Important Financial Institution

G-SII

Global Systemically Important Insurer

IAIS

International Association of Insurance Supervisors

IAIG

Internationally Active Insurance Group

ICP

Insurance Core Principle

MIS

Management Information System

ORSA

Own Risk and Solvency Assessment

PCR

Prescribed Capital Requirement

ReWG

Resolution Working GroupRRP

Recovery and resolution plan

PublicApplication Paper on Recovery Planning
November 2019

Page 4 of 24

1

Introduction

1.
This Application Paper on Recovery Planning provides guidance with respect tosupervisory material related to recovery planning in the Insurance Core Principles (ICPs) andthe Common Framework for the Supervision of Internationally Active Insurance Groups(ComFrame). In particular, it is related to the material in ICP 16.15 and ComFrame 16.15.aand 16.15.b (ICP 16 Enterprise Risk Management for Solvency Purposes), and is also relevant
to supervisory cooperation and coordination arrangements set out in ICP 23 (The Group-wide
Supervisor) and ICP 25 (Supervisory Cooperation and Coordination).
2.
The Application Paper addresses issues that were identified in the development of thismaterial, including feedback received from members and stakeholders during public
consultations. The issues involved both the nature of a recovery plan, and the roles of thesupervisor and insurer with respect to the plan. Subjects that were identified included:The relationship between recovery plans and enterprise risk management (ERM) tools,
including Own Risk and Solvency Assessment (ORSA), contingency plans and otherpreventive or corrective measures;
The circumstances in which it is appropriate for the supervisor to require a recovery
plan; andThe implementation of the proportionality principle with respect to a recovery plan.

3.
In this Paper, terms have the same meaning as set out in the IAIS Glossary. The IAIS
Glossary defines a “recovery plan” as a plan that identifies in advance options to restore
financial position and viability if the insurer comes under severe stress. A recovery plan
includes three elements: (i) credible options to cope with a range of severe stress scenarios,
including both idiosyncratic and market-wide stress; (ii) scenarios that address capital shortfall
and liquidity pressures; and (iii) processes to ensure timely implementation of effective
recovery options in a range of severe stress situations.
4.
This Application Paper should be read in the context of the proportionality principle,
which provides supervisors “the flexibility to tailor their implementation of supervisory
requirements and their application of insurance supervision to achieve the outcomesstipulated in the Principle Statements and Standards”, as described in the Introduction to ICPs.
1.1
5.

PurposeThe purpose of this Paper is to:Provide recommendations and guidance to supervisors regarding recovery planning,and cooperation and coordination between supervisors;
Provide additional information for insurers with regard to recovery planning; andProvide examples to illustrate the application of principles, standards and guidance
relevant to recovery planning.

6.
This Paper does not establish standards or expectations for requiring, creating or
implementing recovery plans. It provides guidance to supervisors when considering whether
to implement recovery planning in their jurisdiction, and if so, how such recovery planning
could be constructed to prove useful to the relevant supervisors. It should not be considered
an exhaustive compilation with respect to recovery planning. The examples in this Paper areprovided only to illustrate recovery-planning concepts.

PublicApplication Paper on Recovery Planning
November 2019

Page 5 of 24

1.2

Scope

7.
This Paper and its concepts are relevant to all insurers1, and its recommendations areapplicable across supervisory approaches among jurisdictions. Generally, the concepts
described in the Paper are equally applicable to the business of insurers and reinsurers. For
further background for supervisors on taking into account the nature of reinsurance business
when supervising reinsurers, see ICP 13 Reinsurance and Other Forms of Risk Transfer. It is
intended to be particularly useful for the supervisors of insurance groups with more complex
structures or larger business operations that may benefit from prior planning for recovery fromsevere stress scenarios.
8.
The Financial Stability Board’s (FSB) Key Attributes of Effective Resolution Regimes
for Financial Institutions (“Key Attributes”) and related materials contain information regarding
recovery planning for “G-SIIs and for any other firm that its home authority assesses could
have an impact on financial stability in the event of its failure”. This Paper has been informedby the Key Attributes and, to the extent appropriate, provides background information andexplains recovery-planning concepts.
9.
This Paper does not address resolution planning. Resolution planning and other
resolution-related matters will be covered in a separate Application Paper.
1.3

Inputs for the Application Paper

10.
This Application Paper relies on existing public and non-public documentation on
recovery planning and supervisory practices, including material from the FSB, IAIS andindividual IAIS members. For the latter, the Paper draws upon the results of a survey of themembers of the IAIS Resolution Working Group (ReWG), which was launched in February
2018, and to which 11 jurisdictions responded with descriptions of supervisory practices onrecovery planning. Where appropriate, practices of recovery planning in the banking sector
are used as a source as well. The Paper also benefited from input from stakeholders during a
stakeholder event held in September 2018, as well as during the public consultation between
November 2018 and January 2019.
1.4
11.

Structure of the Application Paper

The Paper covers the following topics related to recovery planning:







Objectives and concepts of recovery planning (section 2);
Requirements for recovery plans, and the application of the proportionality principle torecovery planning (section 3);
Governance-related matters in recovery planning, including the development andapproval process of a recovery plan and how it relates to overall risk management of
an insurer (section 4);
Key elements of a recovery plan, and examples of how these can be addressed in arecovery plan (section 5); andThe role of the supervisor (or supervisors in a cross-border group) in recovery planning(section 6).

1 The term

“insurer” means insurance legal entities and insurance groups, including insurance-led
financial conglomerates (see Introduction to ICPS).
PublicApplication Paper on Recovery Planning
November 2019

Page 6 of 24

2

Objectives and concepts of recovery planning12.
As defined in the IAIS Glossary, a “recovery plan” is a plan developed and maintainedby the insurer that “identifies in advance options to restore the financial position and viability
if the insurer comes under severe stress”. Recovery planning is therefore the responsibility of
the insurer.
13.

The objective of a recovery plan is twofold:

to aid the insurer in understanding its own risks from severe stress scenarios, andto be better prepared to provide an effective response.

The focus is on situations that pose a serious risk to the viability of the insurer or any
material part of its business.
14.
In the context of this Application Paper, the development of a recovery plan is preemptive in nature. It should not be considered a “preventive or corrective measure” as statedwithin ICP 10 (Preventive Measures, Corrective Measures and Sanctions) as the plan isdeveloped before problems surface rather than in response to problems that have alreadymaterialised or are likely to be imminent.2
15.
To be effective, recovery planning should be integrated in the risk management
framework of the insurer and be developed in advance of any severe stress scenario. Byevaluating risks and recovery options in advance of any severe stress materialising, recovery
planning:Creates awareness and preparedness for possible adverse situations;
Enables the insurer to consider and evaluate the most appropriate and effective
mitigation without the pressures resulting from actual severe stress; andEnables the insurer to make more effective, comprehensive and thoughtful plans andensure their timely activation and implementation.

16.
While recovery planning is intended to enhance the ERM of an insurer, it can also help
the supervisor to understand the insurer more generally and to get a sense of how certain
adverse situations may be addressed by the insurer. A recovery plan may serve as additional
information when the supervisor evaluates the insurer’s preparedness for severe stress andpossible necessary or helpful supervisory measures.
17.
The existing tools within an insurer’s ERM framework may serve as a source of input
when drafting and developing the recovery plan; they may include, but are not limited to, the
ORSA, contingency plans and capital and liquidity risk management plans. Potential benefitsof using these tools as input are to ensure alignment with existing ERM tools and to allow theinsurer to use its resources efficiently. For example, an insurer may find that the appropriate
governance arrangements and reporting lines to discuss in its recovery plan have alreadybeen identified in existing planning documents. An insurer should carefully consider theappropriateness of using aspects of existing ERM tools, and should not simply look to replicate
existing documentation.

2 Some jurisdictions use the term “recovery plan” to refer to the corrective action an insurer is required

to take following a breach of its Prescribed Capital Requirement (PCR, see ICP 17 Capital Adequacy).
This Application Paper does not address those corrective measures.
PublicApplication Paper on Recovery Planning
November 2019

Page 7 of 24

18.
A recovery plan differs from an ORSA in both perspective and objective. The ORSA is
performed regularly by insurers to assess the adequacy of its risk management and capital tosupport current and anticipated business operations as a going concern. It encompasses all
reasonably foreseeable and relevant material risks, and identifies the relationship between
management of those risks and the level and quality of financial resources that are needed
and available to support those risks. An objective of the ORSA is to prevent an insurer fromcoming under severe stress. In contrast, a recovery plan envisions the insurer being
confronted with severe stress, and contemplates actions needed to mitigate stress and restore
the insurer’s financial position and viability.
19.
A contingency plan, as explained in ICP 16 and defined in the IAIS Glossary, describes
in advance the necessary actions and resources to limit business disruption and losses
resulting from an adverse financial event (such as risk exposures exceeding risk limits) or an
operational event (such as a natural disaster). A recovery plan specifically focuses on severe
stress scenarios that may ultimately threaten the viability of the insurer.

3

Scope of application and proportionality

Locationand scope

Requirements (Standards)

Recommendations (Guidance)
related to proportionality

ICP 16.15(Insurance
sector)

The supervisor requires, as necessary,
insurers to evaluate in advance their specificrisks and options in possible recovery
scenarios.

In deciding whether it is necessary to require arecovery plan, and the form, content and levelof detail of a recovery plan, the supervisor
should take into account, for example, theinsurer’s complexity, systemic importance, risk
profile and business model.

ComFrame
CF 16.15a(IAIGs)The group-wide supervisor requires the Headof the IAIG to: (i) develop a recovery plan that
identifies in advance options to restore thefinancial position and viability; (ii) review andupdate the recovery plan on a regular basis, orwhen there are material changes; and (iii) takeactions for recovery if the IAIG comes under
severe stress.

The group-wide supervisor should consider the
IAIG’s nature, scale, and complexity whensetting recovery plan requirements, including
the form, content and detail of the recovery
plan and the frequency for reviewing andupdating the plan.

FSB Key
Attributes for
Effective
Resolution
KA 11.5 (SIIs)

Jurisdictions should require that robust andcredible RRPs are in place for all G-SIFIs andfor any other firm that its home authority
assesses could have an impact on financial
stability in the event of its failure.

A recovery plan for a firm should take accountof its specific circumstances and reflect its
nature, complexity, interconnectedness, levelof substitutability and size.

Figure 1. Overview of varying requirements on recovery planning
20.
This section is intended to provide guidance to assist supervisors when determining
whether to require a particular insurer to engage in recovery planning, and what form, content
PublicApplication Paper on Recovery Planning
November 2019

Page 8 of 24

and level of detail should be required when recovery planning is necessary based on the
proportionality principle. Whether or not it is appropriate to require a recovery plan and thenature and scope of any such requirement depends upon many factors, such as the size ofan insurer, the nature of its business, and its importance in the marketplace. Therefore, as
shown in figure 1 above, the ICPs, ComFrame and the FSB Key Attributes provide direction
to supervisors regarding the development and implementation of recovery plans.
3.1

Proportional application of requirements

21.
ICP 16.15 provides that insurers evaluate in advance their risks and options in recovery
scenarios, as necessary, but does not specify that supervisors require a recovery plan for all
insurers. When the supervisor does not require a recovery plan, an insurer may still be
required to evaluate its specific risks and options in possible recovery scenarios, as necessary.
The supervisor may consider whether it would be beneficial for an insurer to engage in thewritten identification of a trigger framework and recovery options and should assess theappropriate method and form of the insurer’s evaluation, as well as a form of summary
reporting to the supervisor on the outcomes of its evaluation.
22.
The guidance material under ICP 16.15 provides that the supervisor may require an
insurer to develop a recovery plan and explicitly refers to the proportionality principle. A
supervisor may implement the requirement based on either micro- or macroprudential
grounds. For instance, such a requirement could be related to microprudential considerations
such as an insurer’s risk profile, legal form, nature or structure of business, or scope andcomplexity of activities. In addition, from a macroprudential perspective, it may be based onthe (relative) systemic importance of an insurer or its activities or exposures that may lead topotential systemic risk. Criteria to take into account may be related to size, complexity, crossborder operations or interconnectedness.
23.
Outcomes from the survey indicate that various approaches have been used orconsidered to determine the need for a recovery plan. Most supervisors establish a frameworkwith qualitative and/or quantitative factors to assess the need for recovery planning for insurers
within their jurisdiction. Factors that may be used include the following:







The size of an insurer compared to the overall insurance market;
The risk profile and/or complexity of the insurer;
The importance of an insurer to the broader economy of the jurisdiction;
The potential systemic activities or exposures of an insurer: for instance, exposures toany one investment or investment class that leads to increased vulnerability tocommon shocks; orWhether the insurer performs an important function in the real economy of thejurisdiction, which is not easily substitutable.

Supervisors may also choose to decide whether a recovery plan is required for an insurer
on a more case-by-case basis.
24.
The relevant guidance material in the ICP and ComFrame states that the form, content
and level of detail of a recovery plan should be proportionate (see figure 1). When the
supervisor decides that a recovery plan is required for a particular insurer, it is expected thatthe insurer set up a process for the development of the plan to achieve the distinct objectiveof a recovery plan. As discussed in section 2, in the preparations of the plan, the insurer may
leverage, and should ensure alignment with, existing tools within its ERM framework.
PublicApplication Paper on Recovery Planning
November 2019

Page 9 of 24

25.
Outcomes from the survey indicate that various supervisors require simplified recovery
plans, consistent with ICP 16.15. Regarding the development of the plan itself, supervisors
may apply proportionality, while ensuring that the distinct perspective and objective of recovery
planning is maintained in the following ways:Allowing the insurer to use a phased approach for the development of a recovery plan,by submitting a high-level draft initially and taking a more extended period of time toprepare the complete document;
Allowing the insurer to align the timing of the development process with that of existing
tools to minimise the needed resources; orVarying the level of detail and content requested in the plan, for instance by allowing
the insurer to omit some of the elements discussed in section 5, or by detailing fewer
recovery options and stress scenarios in the plan.

26.
Regarding the maintenance of the recovery plan, proportionality could be applied in
the following ways, provided that the recovery plan remains usable and effective:

Varying the frequency for the regular update of the recovery plan, especially when key
relevant characteristics have not changed materially year on year; orAllowing the insurer to monitor some of the indicators in the recovery plan lessfrequently, such as the status of any non-material entities within a group.
3.2

Matters specific to insurance groups

27.
Some matters to consider are specific to group recovery plans, such as supervisory
cooperation and coordination, and the scope of application within the group, which, in the caseof cross-border groups, is further explained in sub-section 6.2.
28.
As the group recovery plan aims to describe how the group as a whole can recoverfrom severe stress, a starting point would be the identification of all legal entities within thegroup and an assessment of their materiality. This includes the head of the group; theinsurance legal entities; the branches; and other regulated entities or non-regulated entities.
Entities that are not material financially or operationally may be excluded from the plan, or thecoverage within the plan may be limited to a short description. For material entities, it may be
expected that they are covered more extensively in various, or all elements of the plan.
29.
The following factors may be taken into account when assessing the materiality of anentity:

Its relevance to the group, for instance in terms of assets, liabilities, revenue, funding,capital, profits or risk profile, but also in terms of the functions that are performed within
the entity, such as key operational, risk or administrative functions; or
Its relevance to the financial system and/or the real economy in the jurisdiction in which
it operates; and in particular, the extent to which the failure to continue to perform its
activities may have a negative impact on either or both.

30.
In the case of a cross-border insurance group, a host supervisor may deem it
appropriate to require a separate recovery plan for the insurance legal entity in its jurisdiction,
particularly in cases where no group recovery plan exists, or the entity in its jurisdiction is not
sufficiently covered by a group recovery plan, or is deemed systemically important in thatjurisdiction. The decision to require a separate recovery plan may be based on factors suchas size, risk profile and/or level of systemic importance in the host jurisdiction. In such cases,
PublicApplication Paper on Recovery Planning
November 2019

Page 10 of 24

however, it is expected that the host supervisor would cooperate and coordinate with thegroup-wide supervisor to avoid inconsistent recovery planning and actions in times of crisis(see section 6).
31.
The same process may be applied in the case of financial conglomerates, where therelevant supervisors may deem it necessary to require separate plans for the insurance legal
entity or entities, depending on the applicable regulation in the relevant jurisdiction.

4

Governance32.
This section addresses appropriate insurer governance for recovery planning
processes, building on an insurer’s existing ERM framework and its strategies, policies andprocesses (see ICP 16 Enterprise Risk Management for Solvency Purposes). Effective
governance for an insurer’s recovery planning process should follow written policies and/or
procedures that provide a clear and sufficiently detailed description of the operational
development process, the approval process, the schedule and process for updating recovery
plans, and operational procedures for activation of the recovery plan and any escalation
processes.
33.
Additionally, this section discusses the role of the Board, Senior Management and Key
Persons in Control Functions relevant to recovery planning. It also addresses the various
phases of recovery planning:

Development, approval, reviewing and testing relates to the development phase of
the recovery plan in advance of any severe stress scenario. This section provides
examples of good practices of processes for developing the initial recovery plan andkeeping it up to date where needed; andMonitoring, escalation and activation relates to governance processes in thesituation in which an insurer is faced with actual, severe stress. Adequate monitoringprocesses are needed to detect such situations promptly, and escalation and activation
mechanisms are aimed to prompt the insurer to start the process of evaluating thevarious recovery options laid out in the plan in response to the specific circumstances.
Such evaluation may also lead to the conclusion that the execution of recovery options
is unnecessary, premature, or no longer required, given the specific circumstances.
4.1

Governance – development, approval, review and testing34.
As discussed throughout this Application Paper, recovery planning aims to equip
insurers with comprehensive and credible pathways to restoring soundness that are kept up
to date and that can be implemented effectively and in a timely manner. To achieve this goal,a formalised governance process around developing, approving and updating the recovery
plan will benefit from the participation of the insurer’s Board, Senior Management and Key
Persons in Control Functions relevant to activation and implementation of the recovery plan.
A governance process that includes such active participation in the development of therecovery plan will increase the likelihood that the recovery planning process and the substanceof the recovery plans are fully integrated into the insurer’s corporate governance arrangements(for supervisory expectations on an insurer’s corporate governance arrangements see ICP 7
Corporate Governance) and the insurer’s ERM.
35.
Regarding development and approval of the recovery plan, the insurer’s governancecould benefit from addressing the following elements in policies and procedures:
PublicApplication Paper on Recovery Planning
November 2019

Page 11 of 24










Identification of Board Members, Senior Management and other relevant Key Persons
in Control Functions with significant roles in the development and approval of therecovery plan, and a description of their role and responsibilities;
The establishment of a development and approval process with an appropriate
segregation of duties and controls between those accountable for the development of
the plan and those who review and/or approve the plan. It would be expected that theBoard is responsible for the final approval of the recovery plan;
Consideration of how the development and approval processes and the roles andresponsibilities of key participants in those processes integrate and interact with theinsurer’s overall corporate governance framework;
Review to ensure that recovery plans are consistent with the insurer’s overall ERM andrisk appetite; andEstablishing communication procedures to ensure the supervisor is informed andupdated appropriately during the development process.

36.
Regarding review and updating of the recovery plan, the insurer’s governance could
benefit from addressing the following elements in policies and procedures:

Identification of (key) Board Members, Senior Management or other relevant Key
Persons, and their roles and responsibilities with respect to reviewing and updating therecovery plan;
Description of the frequency for review and update of the recovery plan as follows:ooTiming for keeping the plan up to date through regular reviews and updates.
Factoring and taking into consideration when reviews and updates could betriggered by:events internal to the insurer (eg material changes in the insurer’s
structure or operations, its strategy or aggregated risk exposure) or by events external to the insurer (eg a significant change in capital
markets that impacts the insurer’s capital management or liquidity
plans),
as those events could materially affect the insurer, or the viability of the plan.


Ensuring that any changes to the recovery plan are communicated in a timely manner
to relevant parties, including the supervisor; andEnsuring that the insurer’s management information system (MIS) and ERM capture
events that would trigger the need to update the recovery plan and to do so in a timely
manner. An insurer should outline its process for regularly monitoring the internal andexternal events that could trigger a review and update of the plan.

37.
Regarding testing of the recovery plan, the insurer’s governance could benefit fromaddressing the following elements in policies and procedures:

Establishment of regular tests of the recovery plan to check whether the plan can be
activated and implemented in a timely manner, and that the operational procedures
and implementation governance of the plan are effective. Any lessons learned should
be incorporated in the update process;Operational testing of the recovery plan could focus on improving execution andtraining for internal escalation processes and communication strategies, or engaging
in simulation exercises working through the recovery plan in a time-accelerated

PublicApplication Paper on Recovery Planning
November 2019

Page 12 of 24



exercise with relevant key persons. It should be noted that such simulation exercises
may be resource-intensive and that different exercises may focus on different aspectsof the recovery plan, such as effectiveness of recovery options, communication or
governance; andThe insurer’s existing stress testing framework can also be an effective way to test thecredibility of the recovery plan, particularly in relation to the menu of recovery options
and the calibration of the trigger framework.
4.2

Governance – monitoring, escalation and activation processes

38.
The recovery plan should also have an embedded governance process for monitoringand escalating breaches of recovery triggers and for activating the recovery plan, which
includes a description of the key roles and responsibilities of the insurer’s Board, Senior
Management and Key Persons relevant in the plan, and for stakeholders – including
supervisors.
39.
Timing is a critical element in the ability of recovery plans to achieve their aims. As
events and stressors may materialise at short notice and/or within short periods of time (eg anearthquake), it is essential that the event or stressor is quickly recognised and the recovery
plan is activated in a timely manner. As a result, clear governance policies and procedures
around (timely) monitoring, escalation and activation are critical.
40.

With respect to monitoring, policies and procedures should:





41.

Ensure that the insurer’s MIS captures any trigger event and does so in a timely
manner. An insurer should outline its process for regularly monitoring the range of
criteria in its trigger framework. Insurers should be able to demonstrate that appropriate
MIS are in place to support this monitoring process;Outline the circumstances in which the insurer would consider an increased level ofmonitoring and reporting to the Board and Senior Management, for example moregranular and/or more frequent reporting of management information; andForm necessary monitoring and governing committees, such as a crisis management
team.
With respect to escalation and activation, policies and procedures should:








Clearly identify the process and timing for escalation to the Board and Senior
Management upon stress events implicating the possibility of recovery actions; thisshould include the process required when one or more specific criteria in the trigger
framework have been breached;
Clearly identify the process for activation of the recovery plan upon severe stressevents, including but not limited to occurrence of the specific criteria in the trigger
framework as identified in the plan;
Identify the roles and responsibilities of Board Members, Management and otherrelevant Key Persons in Control Functions; andInclude plans that ensure that any activation of the recovery plan is communicated ina timely manner to all relevant parties, including the supervisor.

42.
The points above emphasise the role of the insurer’s Board and Senior Management
in recovery planning, as it may involve decisions that significantly affect the insurer. Recovery
plans should not commit an insurer to take any action without first evaluating relevant
PublicApplication Paper on Recovery Planning
November 2019

Page 13 of 24

information and deliberating on the best course of action. In fact, the insurer may, in somecircumstances, conclude that implementation of recovery options may be unnecessary,premature or no longer required, based on an evaluation of the relevant information. It can be
helpful for the Board and Senior Management to consider their recovery options throughdevelopment of operational guides or manuals, but this should not bind or limit the actions
taken when stress actually occurs.
43.
The recovery plan should establish adequate procedures for keeping supervisors
notified of an emerging stress scenario and for sharing plans on the recovery options
contemplated for implementation, including adequate time and governance controls to ensurethat any applicable supervisory approvals are obtained (see also section 5.6). This isparticularly important for insurers with significant cross-border operations, in relation tokeeping foreign supervisors and local management notified (see also section 6.2).

5

Elements of a recovery plan

44.

The key elements of a recovery plan will often include:










An executive abstract of the most important substantive elements of the recovery
plan, most notably of the trigger framework and available recovery strategies;
A description of the insurer or group that outlines the insurer’s legal structure, its
main activities, and key financial and operational characteristics;
A trigger framework that allows the insurer to identify in a timely manner any
emerging risks that may have the potential to threaten its viability;
A description of its governance for recovery planning and utilisation of the plan itself,
including the alignment of the plan within existing corporate governance and risk
management frameworks;
A menu of recovery options outlining ways in which the insurer could recover fromsevere stress scenarios;
A communication strategy to keep supervisors informed and to help manage theexpectations, and/or retain (or restore) the confidence of market participants andpolicyholders as necessary; andA set of stress scenarios to assist in assessing the credibility and feasibility of therecovery plan, notably of the trigger framework and recovery options.

45.
The guidance provided in this section can be used by both supervisors and insurers.
Supervisors may use it as input for developing more detailed guidelines within their jurisdiction.
Insurers, on their part, may find it useful background information when developing or
assessing their own recovery plan.
5.1

Executive abstract of the recovery plan

46.
It may be useful if the insurer develops a high-level abstract of the main operational
components of the recovery plan. It is considered to be best practice to include a summary of
the most significant trigger points, key recovery strategies, and the operational plan for
implementation.
47.
The purpose of the executive abstract is to serve as a roadmap of the recovery plan toenable the Board and Senior Management to quickly understand and assess the governance,
trigger framework, recovery options and communication strategies for effectively responding
PublicApplication Paper on Recovery Planning
November 2019

Page 14 of 24

to a severe stress situation. It may be helpful to use tables and flow charts to summarise these
operational details. It may also be helpful to include a description of how the recovery plan is
integrated into the overall ERM of the insurer (see section 2).
48.
It may be useful if the insurer documents a record of all material changes incorporated
into the recovery plan as it is updated. This can be a useful reference for the Board and Senior
Management when reviewing and using the plan.
49.
The executive abstract can also serve as a useful aid for supervisors when reviewing
and assessing recovery plans as it should reflect any material changes made, and outline theoperational components of a credible recovery plan.
5.2

Description of the insurer or group50.
The description should summarise the insurer’s operational business structure, legal
structure, key jurisdictions in which it is active, entities covered by the plan, functions and/or
services that are significant for the continuation of business, key dependencies or interdependencies, and any other relevant information. Examples of functions and/or services thatare significant for the continuation of business include information technology services,management services, shared services (if a group) and necessary outsourced functions . This
will enable all decision-makers and supervisors to assess the implications of different recovery
actions for the insurer or all entities in a group, and the group as a whole.
5.3

Trigger framework

51.
The trigger framework should identify a set of pre-defined criteria, which may trigger
the activation of the recovery plan so as to allow the insurer to successfully monitor, escalate
and activate the appropriate range of responses for an emerging stress event.
52.
The trigger framework should be aligned with other contingency plans and processes
in the insurer’s ERM, for example, the ORSA and capital and liquidity risk management
policies. For example, supervisors may observe an overlap between the criteria being
monitored under existing capital management policies, stress testing and any contingency
plans, including risk metrics and limits defined in the risk appetite.
53.
The trigger framework should be tailored to reflect the insurer’s risk profile andoperating environment and should use appropriately calibrated metrics so that the recovery
plan is activated when the insurer is under stress.
54.
The trigger framework should include a broad range of criteria that are pre-determined
and well defined to prompt timely responses from the insurer. It should operate in a cascadingmanner to reflect the fact that different levels of response will be required, depending on thecircumstances and severity of the stress event. For instance, an insurer may choose to use
certain criteria as ‘early warning indicators’ to alert it to emerging risks, and determine thatthese criteria require heightened monitoring. Other criteria may be used as ‘trigger points’ for
informing more intensified responses such as instigating escalation procedures and activationof the recovery plan.
55.
The framework should include quantitative and qualitative criteria and include a
forward-looking element, where possible. For example, the survey showed that effective
trigger frameworks may include criteria relating to capital, liquidity, asset quality, profitability,
market conditions, macro-economic conditions and the insurer's operational conditions.
PublicApplication Paper on Recovery Planning
November 2019

Page 15 of 24

By way of illustration, the insurer may consider incorporating the following types of criteria:









Solvency: identify deterioration in the insurer’s quantity and quality of capital,
including metrics that may be sourced from an applicable capital framework;
Liquidity: identify deterioration in the insurer’s capacity to meet its liquidity needs,
including metrics that may be sourced from any existing liquidity management
policies;
Asset quality: identify deterioration in the quality of the insurer’s asset mix;
Insurance liabilities: capture changes in the external or internal environment that
may cause an increase in the technical provisions, for instance related to mortality,
claim severity or interest rates;
Profitability: capture deterioration in the insurer’s financial position due to insurance
or investment related losses;
Market: capture deterioration in investment performance and market confidence in
an insurer’s financial condition, such as CDS spreads, share price movements andrating downgrades;
Macro-economic: identify emerging risks in the insurer’s operating environment,such as unemployment rates, interest rates, inflation or real estate prices; andOperational: capture operational events that could threaten financial viability, suchas fraud, regulatory fines or cyber-attacks.

Box 1: Examples of criteria (quantitative or qualitative)
56.
The trigger framework should be calibrated to provide enough time for the Board andSenior Management to:

Fully evaluate the circumstances of the stress;
Engage in effective decision-making on the appropriate recovery option(s); andImplement action on the selected recovery option(s) to respond effectively to theemerging stress event.

57.
For example, with regard to solvency criteria, an insurer may decide to calibrate trigger
points for activation of the recovery plan at a credible distance from any regulatory minimums,
such as the PCR.
58.
Stress testing and scenario analysis can provide an important feedback loop into theeffectiveness of the trigger framework’s calibration by demonstrating that the trigger points arecalibrated to enable effective recovery options to be chosen and implemented in a timely
manner.
59.
Figure 2 illustrates the relationship between viability, the risk appetite and trigger
framework and the nature of actions to be taken in a stylised way. It captures the principles
discussed in this section, such as alignment with the ERM and the cascading nature of thecriteria. The left-hand (green) part is related to an insurer’s risk appetite framework, which
generally identifies target levels in which the insurer is operating “business as usual”. The
middle (orange) and right-hand (red) parts of the figure relate directly to the recovery plan, in
which criteria are set at cascading levels to indicate emerging stress. The part to the right ofthe point of non-viability is related to the phase of resolution and is not in the scope of thisPaper. The specific thresholds in the figure are hypothetical and are included purely forillustrative purposes.

PublicApplication Paper on Recovery Planning
November 2019

Page 16 of 24

Viability

ViableRisk appetite
and Triggers
PCR
Excess liquidity
Loss
RatingActions to be
taken

Target••••> 150%> 220 million
Not applicable
A- / A1

Business as usual

Early warning indicator

•
•
•
•

< 130%< 100 million> 250 million
Negative watch or
downgradeNon-viable

Recovery trigger

•
•
•
•

The point at which the insurer
is no longer viable or likely to
be no longer viable, and has no
reasonable prospect of
becoming so< 110%< 25 million> 750 million
Downgrade below
investment grade

RecoveryResolution

Figure 2. Stylised relationship among recovery triggers, viability and actions to be taken
5.4

Governance60.
The recovery plan should describe the governance for recovery planning and utilisationof the plan itself, including alignment of the plan within existing corporate governance and risk
management frameworks, as described in more detail in section 3. This includes a descriptionof the processes for monitoring, escalating and activating the recovery plan, and a descriptionof the key roles and responsibilities of stakeholders for each part of the governance process.
5.5

Recovery options

61.
The core of the recovery plan is the menu of options that an insurer identifies inadvance of any stress as potential pathways to effective recovery in the event of severe stress.
This menu of options should be comprehensive, with a focus on options that are able tosignificantly enhance and restore the capital and/or the liquidity position in times of severe
stress. The range of recovery options would usually include acts to: raise capital or otherfunding, increase liquidity, reduce costs, and enhance risk mitigation. The recovery options
may also include options that have permanent structural or strategic implications whennecessary. See box 2 for examples of possible recovery options.
62.
The menu of recovery options should be developed without being limited to any
specific stress scenario, with the scenario analysis then being used to help assess whether
the recovery options provide sufficient capacity for recovery across a range of potential
stresses and whether they can be implemented in a timely manner.
63.
The menu of recovery options should be supported by information required to assess
and implement each option, including appropriate strategic, financial and operational analysis.
It is important that this analysis is underpinned by realistic assumptions, particularly in relation
to pricing and valuation, to properly reflect that the option would be implemented incircumstances of severe stress. Independent third party evaluations may provide further
assurance on the credibility and feasibility of proposed actions.
PublicApplication Paper on Recovery Planning
November 2019

Page 17 of 24

By way of illustration, the insurer may consider incorporating the following types of recovery
options:









Strengthening the insurer’s capital position: such as recapitalisations, rights issue,
institutional or strategic private placements, triggering convertible instruments, interfund transfers;
Actions of capital conservation: such as cost containment, suspension of dividends
and variable remuneration payments, elimination of major projects;
Business strategies: such as changes to underwriting practices, repricing of
insurance contract premiums, re-alignment to reinsurance programmes or other derisking of the business via, eg reducing premium volumes;
Investment strategies: such as changes to asset allocation and to hedging
programmes;
Voluntary restructuring of liabilities: such as debt-to-equity conversion;
Reinsurance actions: eg expanded use of quota share on all or selected businesslines or products or whole of account, enhanced adverse development covers;
Strategic: such as run-offs, portfolio transfer arrangements, and sales. These could
be solvent run-offs of business lines (particularly those that are non-core), and thesale of strategic investments and of domestic or overseas subsidiaries; andLiquidity: such as accessing available contingent capital as envisioned in theliquidity risk management plan, more frequent settlement of intra-company balancesand deferring or halting unnecessary cash outflows.

Box 2: Examples of recovery options
64.
The menu of recovery options should include a detailed description for each recovery
option identified. Some details that may be considered for inclusion are as follows:












A summary analysis that reports the essential elements of the option;
A description of the option;
An overview of the key assumptions underlying the option and the basis for any expert
judgment;
An assessment of strategic implications of executing the option;
An assessment of the financial impact in normal and stressed market conditions. It
may be appropriate to consider a range of pricing and asset valuation outcomes;
Potential adverse consequences of executing the option;
Speed and timing for effective execution;
Any dependency on external counterparties for effective execution;
Operational aspects underlying effective execution, highlighting delegated authorities
and approval requirements;
An assessment of potential impediments and constraints to effective execution, bothinternal and external; andA brief description of any previous experience with applying a certain option, including
lessons learned from that experience.

The insurer could summarise this information in a table for ease of use.
65.
It may also prove helpful to assess the compatibility of recovery options. This will aid
the insurer in designing a flexible plan with a wide range of options to respond to different
types of stress scenarios. By assessing compatibility, the plan will envision how options canPublicApplication Paper on Recovery Planning
November 2019

Page 18 of 24

be combined to help the insurer recover from a severe stress. For each option, it is appropriate
to consider the impact it may have on the execution of any subsequent recovery actions.
66.
The review of recovery options should be comprehensive and wide-ranging. It may beappropriate to conduct qualitative analyses, and to incorporate expert judgment into thisprocess. In general, options that do not generate material benefits in term of capital or liquidity,or that present significant impediments or constraints, are likely to be inappropriate and should
be dismissed. As the insurer is not bound by the recovery options in the plan, it may be helpful
upon implementation of the plan to identify any potentially valid options that were considered
but dismissed, including a brief explanation and the reason why the options were dismissed.
67.
Lastly, the insurer may decide to take any preparatory measures to facilitate theimplementation of the recovery plan, for instance to overcome any identified impediments toeffective execution of a recovery option, or to increase the chance of timely execution of arecovery option. These measures and any progress towards them could be noted in therecovery plan.
5.6

Communication strategy

68.
The communication strategy is important for successfully implementing a recovery
plan as it will ensure effective and clear communications with internal and external
stakeholders and will be particularly important in helping to manage external stakeholders’expectations, and retain (or restore) their confidence if necessary.
69.
The strategy should consider circumstances where confidentiality needs to be
maintained regarding the impact of the severe stress and the implementation of the recovery
plan. There may be circumstances where the implementation of recovery actions should be
kept confidential, in consultation with supervisors. When developing the communication
strategy, the insurer should be mindful of any legal and regulatory requirements regarding
disclosure and confidentiality (see ICP 20 Public Disclosure).
70.
The plan may include tailored communication strategies that recognise the different
communication needs depending on the stress scenario and the recovery action(s) being
implemented. An effective communication strategy will consider the scope, detail and timingof the disclosures, and the form of communication. The insurer would also need to consider
the additional resources (human, facilities, etc.) required to support the communication
strategy.
71.
The strategy should consider communication with both internal and external
stakeholders, including supervisors, management, staff, key counterparties and policyholders.
Communication with analysts and the press may also be relevant. Depending on the audienceand the recovery actions, it may be appropriate to describe the key roles and responsibilities
of Board Members, Senior Management, Key Persons in Control Functions and relevantbusiness units (such as the communications office) related to the activation of thecommunication strategy.
72.
As part of its communication strategy, the insurer should consider the frequency anddetail of updates to the relevant supervisor(s). It would be expected that the insurer informs
the supervisor:

In anticipation of a likely breach of one or more recovery trigger points, including adescription of the circumstances leading to the potential activation of the recovery plan;

PublicApplication Paper on Recovery Planning
November 2019

Page 19 of 24

Immediately in the event of a breach of one or more recovery trigger points, describing
the causes and consequences of such breach. This includes any host supervisors, if
relevant (see also section 6.2);
When a trigger point is breached but the insurer deems that activation of the recovery
plan is not necessary, the insurer should:
o
o
o
o






fully discuss the decision with the supervisor;
explain management’s assessment and reasoning for not activating therecovery plan;
advise as to the possible mitigating actions that the insurer intends to executeto restore its position and prevent a further deterioration of the situation; andregularly report on the effectiveness of any mitigating actions, and whether
further action is required;

When the recovery plan is activated;
Periodically after activation of the recovery plan, with updates on the progress andimplementation status of the selected recovery options and its effects on the causesof the stress scenario, eg, the solvency and liquidity positions of the insurer; andFinally, once the recovery has been successful and the insurer has moved outside of
the recovery zone, it should also give prompt notice to the relevant supervisor(s).

73.
The communication strategy with other external stakeholders, including investors,
analysts, rating agencies and the media, should consider possible options for the detail andtiming of information to be provided, and the level and form of communication. These
communications may support the effectiveness of certain types of recovery options.
74.
Overall, the strategy should address the different tools that the insurer could use,
depending on the circumstances and the stakeholder involved, which may include written
notices, press releases, conference calls, and physical meetings. Examples of communication
channels for policyholders may include:

Agents and employees who are in direct contact with policyholders (contact centre andcustomer relationship managers);
Proactive communication (websites, press releases, email and social networks) inorder to ensure real time communication, particularly in the event of an emergency;
andReactive communication (inbound calls in Contact Centres, emails, online chats)75.
It is important to recognize that in times of crisis, employees may be ambassadors toexternal stakeholders and will likely need clear and timely updates. Internal and external
messages should align, with a fresh and frequent flow of updates to avoid speculation andrumour. These may include establishment of the following:Key messages and Q&A for agents and customer-facing employees;
An insurer message to all employees; andManagement speaking points for plenary/functional meetings.
5.7

Stress scenarios

76.
Recovery plans should include credible options to respond to a range of severe stressscenarios. This subsection provides guidance on stress scenarios, drawing on the experienceof various jurisdictions. Although stress scenarios are helpful and an important tool to test the
PublicApplication Paper on Recovery Planning
November 2019

Page 20 of 24

feasibility of recovery options, it is impossible to foresee all possible relevant scenarios that
may ultimately affect the viability of the insurer. Consequently, insurers should not limit
themselves to looking at a predetermined set of stress scenarios when developing theirrecovery plan.
77.
The use of scenario analysis helps to assess the credibility and feasibility of therecovery plan, including the trigger framework and menu of recovery options. It also gives
insurers and supervisors insights into major risk factors and possible impediments to recovery.
Furthermore, scenario analysis may support the decision-making process concerning therecovery actions to be taken after implementation of the recovery plan.
78.
It is best for stress scenarios to be severe but plausible, tailored to the risks of theinsurer, and result in a serious risk to the viability of the insurer. For example, calibration torepresent a near-default scenario, such as a breach of the PCR, would achieve this goal.
Additionally, reverse stress testing could be chosen for one or more scenarios.
79.
The scenarios should cover appropriately defined events that are most relevant to theinsurer, taking into account the insurer’s risk profile, business model, group structure (ifapplicable) and other relevant factors, and include:

Idiosyncratic stress events, where the negative impact is specific to an insurer orgroup;
Market-wide stress events, affecting the financial system and/or real economy; andA combination of idiosyncratic and market-wide stress events.



The scenarios could include both slow-moving and fast-moving adverse events.
80.
For each scenario, the insurer should estimate the impact on the solvency, capital andliquidity of the insurer and other relevant material entities in the group, and consider whether
there are critical operational dependencies that make the insurer more vulnerable to a crisis.
The nature and extent of impacts on the policyholders should also be considered. Other
impacts may also be appropriate for consideration/calculation.
81.
Furthermore, an effective analysis of the scenario would include an explanation of thetriggers that are breached under each scenario and when they occurred.
82.
The insurer should set out which recovery actions it would consider in each of the
scenarios, taking into account the stressed market conditions. This will further the insurer’s
understanding of which recovery actions may be favoured and which are less viable in given
scenarios. For instance, some recovery actions may be less realistic and viable in a systemic
scenario where it is likely that more than one insurer will be seeking to implement similar
recovery actions.
By way of illustration, the insurer may consider using the following types of stress scenarios:Market-wide events:

A significant fall in financial markets;
Significant changes in the interest rate environment;
A high-impact catastrophic event, such as a pandemic or climate-related event; orA significant increase in longevity following a medical breakthrough.

Idiosyncratic events:
PublicApplication Paper on Recovery Planning
November 2019

Page 21 of 24






Mass lapse;
The failure of counterparties that are significant to the insurer;
Severe losses through a rogue trader; or
A major cyber-security breach.

Box 3: Examples of recovery scenarios

6

Supervisory considerations

83.
Recovery plans are developed, maintained and implemented by the insurer; in short,they are owned by the insurer. Supervisors should assess recovery plans and challenge
insurers when these plans do not appear to be effective or suitable for the designed purposeof recovery. As described in ICP 16, if the supervisor identifies material deficiencies in theplan, it should provide feedback and require the insurer to address these deficiencies.
6.1

Assessing recovery plans84.
A first key supervisory consideration is having the ability to require amendments to theplans when necessary, and to require being kept informed by the insurers about any changes
to the plans or activation of the plans (see section 5.6). In addition, the supervisor should
consider whether it has sufficient quantity and quality of supervisory capacity (eg personnel,
technology, etc.) to be able to carry out supervisory duties in respect to recovery plans.
85.
Supervisors should assess whether recovery plans are satisfactory, considering
among other things, if the plans are complete and align with the insurer’s risk profile and risk
management. Supervisors should assess the quality of the plan, including whether the plan isclear and comprehensive, contains relevant and complete information, is sufficiently detailed,contains a sufficient range of recovery options and is internally consistent (eg aligned withother contingency plans and integrated with the insurer’s overall risk management framework).
In addition, supervisors should assess the credibility of the plan, whether the recovery options
identified are implementable (eg if a recovery option involves the sale of a subsidiary, whether
this can be done expediently and obstacles to implementation have been identified andaddressed). Last, but not least, supervisors should assess whether the recovery plan can be
implemented in a timely manner.
86.
Supervisors should challenge insurers when they identify concerns regarding therobustness of the recovery plan. For example, supervisors may form the view that:






The stress scenarios provided in the recovery plan are not sufficiently severe, and do
not place the insurer under a stress that actually threatens its viability;
The trigger framework is inappropriate for the purpose of invoking the recovery plan ina timely manner;
The menu of recovery options is considered to be insufficient;
The valuations or anticipated execution timeframes of recovery options are notconsidered to be feasible; or
The impediments to the recovery plan and/or recovery options have not beenadequately considered.

87.
Where supervisors identify any concerns regarding the robustness of the recovery
plan, they should have the power to require the insurer to resubmit the recovery plan.

PublicApplication Paper on Recovery Planning
November 2019

Page 22 of 24

88.
Recovery plans should not be seen by the insurer as a ‘compliance exercise’ butinstead, they should be embedded in the insurer’s risk management framework. In thisrespect, the supervisor can look for evidence of engagement from the insurer’s Board andSenior Management in designing, challenging and testing the plan. The supervisor should also
check that the plan has been correctly structured in a usable document. The effectiveness ofrecovery planning can be enhanced if Board Members and Senior Management have been
involved in developing the plan and when the plan is owned by the most senior people in theorganisation.
89.
Supervisors may find it helpful to assess recovery plans not only on an insurer-byinsurer basis, but also on a comparative and an aggregate basis. Benchmarking recovery
plans from different insurers may help in assessing the quality and credibility of the individual
plans, while recognising the difference in business models among insurers. Moreover, bylooking across the industry, the supervisor may better understand and be able to compare
how insurers would react in a stress scenario. For instance, supervisors may find it helpful aspart of their macroprudential surveillance to assess how an insurer’s recovery actions may
impact or be impacted by actions of other insurers in cases of market-wide stress, such as asevere market down-turn. This also includes whether each insurer’s recovery strategy makes
sense and is feasible compared to peers (comparative level analysis and assessment), andwhether multiple insurers trying to take similar actions at the same time could lead to contagion(aggregate level analysis and assessment).
90.
Supervisors should also require insurers to keep the recovery plan up to date andshould encourage them to test its usability in practice (see sections 3.1 and 4.1).
6.2

Supervisory cooperation and coordination

91.
An insurer’s recovery planning may have implications beyond the jurisdiction of theinsurer. This is particularly true for IAIGs. Whenever recovery planning concerns more than
one supervisor, there should be arrangements in place to enable cooperation and coordination
among supervisors. Supervisory colleges or Crisis Management Groups (CMGs) are
examples of supervisory cooperation and coordination arrangements (see ICP 23 and 25, andthe ComFrame material integrated therein for details on supervisory colleges and CMGs
respectively). Appropriate considerations for the sharing of confidential information with othersupervisors must be made (see ICP 3 Information Exchange and Confidentiality
Requirements).
92.
Supervisory cooperation and coordination arrangements contribute to theeffectiveness and efficiency of recovery planning at both group and legal entity levels. Further,
they should set out, as appropriate, the scope and modalities for cooperation and coordination
among supervisors throughout the various stages of recovery planning and action discussed
in this Application Paper. Among other things, it may help to identify and address any crossborder elements that may affect recovery planning and action, for example regulatory
approvals needed for the execution of a recovery option.
93.
Supervisory cooperation and coordination can also help ensure that the interests ofeach jurisdiction are given due consideration and are balanced appropriately, for example
when recovery options contemplate group level funding of cross-border subsidiaries.
94.
If multiple recovery plans are created within a group (eg recovery plans on a grouplevel and on a legal-entity level in certain jurisdictions), supervisory cooperation andPublicApplication Paper on Recovery Planning
November 2019

Page 23 of 24

coordination arrangements should address alignment between the plans, and contribute to
identifying and addressing any elements that may affect the effective and efficient interaction
between these plans. Also, the group should ensure the consistency of recovery options,trigger frameworks and governance arrangements between group and legal entity level plans,
and be transparent about any interdependencies between group and subsidiary-level.
95.
In some cases, there may not be supervisory colleges or CMGs in place although theinsurer performs cross-border activities that may necessitate cooperation and coordination
amongst supervisors. In these cases, supervisors should consider alternative arrangements.
The IAIS Multilateral Memorandum of Understanding can be of help to facilitate sucharrangements.
96.
Cooperation and coordination in respect to recovery planning may also affect otherbodies in addition to insurance supervisors, for example, resolution authorities or policyholder
protection schemes. The supervisor should identify these bodies and, as appropriate, consider
the establishment of cooperation arrangements with them.

PublicApplication Paper on Recovery Planning
November 2019

Page 24 of 24