Keynote speech at the International Forum of Insurance Guarantee Schemes (IFIGS)

Good morning, ladies and gentlemen,

Before I turn to my remarks, allow me to express my deepest appreciation to our distinguished speakers for their inspiring opening remarks and congratulatory addresses.

First and foremost, I wish to convey my sincere gratitude to Mr SeongSig Kim, Chairman and President of the Korea Deposit Insurance Corporation and Chair of the International Forum of Insurance Guarantee Schemes.

Mr Kim, thank you for your hospitality, your leadership in bringing us together, and your continued commitment to strengthening international cooperation.

I would also like to express my deep appreciation to Mr Eog-weon Lee, Chairman of Korea's Financial Services Commission, for his valuable and encouraging words.

My sincere thanks also go to Mr Alejandro López, Chair of the International Association of Deposit

Insurers, for his dedicated efforts in advancing cooperation across our international community.

We are truly honoured to have heard from such distinguished leaders. Their interventions provide an excellent foundation for our discussions.

Building on these perspectives, I would like to turn to the subject of insurance guarantee schemes, starting with a fundamental question raised by the Property and Casualty Insurance Compensation Corporation (PACICC) of Canada in their recent update publication of ‘The Global Failed Insurer Catalogue’:

Do insurers still fail?

At first glance, one could be tempted to answer "not often" or even "hardly ever".

After all, over the past decades, the global insurance sector has benefited from major advances in prudential regulation, stronger supervisory frameworks and significant improvements in enterprise risk management. Internationally, the work of the IAIS, including the development of the Insurance Capital Standard, has further strengthened the resilience of the sector.

Yet the evidence tells us something important. The work conducted by Alister Campbell and his team through the world's most comprehensive publicly available database of failed insurers leads to a clear conclusion:

• Insurers still fail.
• In fact, on average, almost 50 insurers around the globe fail each year. Almost 1300 insurers known to have failed since 2000 across 98 different countries.

This should, however, not be interpreted as a failure of regulation. Strong regulatory and supervisory frameworks have undoubtedly reduced the frequency and severity of insurer failures. But they cannot eliminate them entirely. As long as insurers operate in dynamic markets, face changing economic conditions and are ultimately managed by people making decisions under uncertainty, failures will remain part of the landscape.

Historically, insurer failures were often viewed through a purely sectoral lens. Today, that perspective is no longer sufficient. Insurers have become major institutional investors, critical providers of long-term capital and essential risk absorbers for households and businesses. Their role within the broader financial system has expanded significantly. While insurance business models remain fundamentally different from those of banks, a disorderly insurer failure can undermine confidence, disrupt policyholders and counterparties and, in some circumstances, generate wider financial stability concerns.

This growing recognition is reflected in the increasing attention at international level, devoted by the Financial Stability Board (FSB) to insurer resolution and in the inclusion of insurance within the FSB Key Attributes framework.

And what about Europe? Do we really need Insurance Guarantee Schemes in Europe?

After all, European insurers operate under Solvency II, one of the most sophisticated prudential frameworks globally, recently reviewed. And from January 2027 onwards, the Insurance Recovery and Resolution Directive will further strengthen the framework for managing insurers in distress.

• Still, in my view, the answer is a clear “yes”.

Both frameworks are essential and will contribute to greater resilience. However, neither can completely eliminate the possibility of an insurer failing.

The IRRD is still in the implementation phase. Resolution authorities are being established across Member States, insurers are adapting their governance and recovery planning arrangements, and EIOPA is supporting a consistent implementation throughout the Single Market. Its full impact can only be assessed in the years ahead.

Regarding Solvency II, the prudential framework has undoubtedly strengthened the resilience of the European insurance sector. The data collected by EIOPA show a decline of failures and near-misses over the past decade. Yet insurer failures continue to occur. According to the Global Failed Insurer Catalogue, since 2000, European failures have still represented around one fifth of global failures. According to our information, in a majority of cases, this refers to resolution and wind up or run-off the company.

Some of these failures happen within one Member State, some impact multiple member states and require involvement of EIOPA. I can say that during my first term as Chairperson of EIOPA I witnessed 7 cross border failures. That experience reinforced a simple reality:

• The objective of regulation cannot be to assume failures will never occur; it must also be to ensure that when they do occur, they can be managed in an orderly manner and policyholders are properly protected

Now that it is clear that insurers fail and will continue to fail, I believe it is interesting to address another important question.

Why do insurers fail?

The Global Failed Insurer Catalogue identifies a common reason for the rising number of insolvencies worldwide. In difficult market conditions or unexpected financial developments, such as movements in interest rates, tend to affect companies with weaker balance sheets more than others in the market. This is not always bad news, exits are part of a healthy economy.

From a European supervisory perspective, in our work, two main factors appear repeatedly. First, inadequate governance and internal control mechanisms within undertakings; and second, competence-related risks associated with management and staff.

In many respects, both factors ultimately come back to human behaviour. And that is precisely why failures can never be completely regulated away. No matter how robust the regulatory framework becomes, governance failures, poor decisions and inadequate risk management will continue to challenge undertakings from time to time.

This brings me to a central question of today's discussion:

What is the added value of an Insurance Guarantee Scheme?

Let me answer that question by highlighting three points.

• First, Insurance Guarantee Schemes protect policyholders when all other safeguards have been exhausted.

The primary purpose of an Insurance Guarantee Scheme is straightforward: protecting policyholders. When a failure does occur, policyholders should not face uncertainty regarding the benefits they have paid for and legitimately expect to receive. Depending on the circumstances, an Insurance Guarantee Scheme may provide compensation to policyholders, support the continuation of insurance policies, or facilitate the orderly transfer of portfolios to another undertaking.

The precise mechanism may differ from one jurisdiction to another, but the objective remains the same: protecting policyholders when all other safeguards have been exhausted.

Importantly, an IGS would not necessarily be expected to cover the full policyholder liability. Recoveries from the insurer's remaining assets would typically reduce the overall funding need, meaning that the scheme may ultimately cover only part of the loss.

• Second, IGSs provide clarity and certainty when trust is most vulnerable.

In insurance, trust is key. Consumers cannot reasonably be expected to assess the probability of insurer failure, understand the interaction between supervisory frameworks, resolution regimes and insolvency law, or determine how cross-border arrangements may affect them.

They simply expect the promise embedded in an insurance contract to be honoured. Insurance Guarantee Schemes help preserve that confidence by providing clarity and certainty at moments when confidence is most vulnerable.

This is also why transparency matters. Consumers should know whether their policies are protected and, if so, to what extent. Policyholders should not need specialist knowledge to understand the degree of protection available to them, nor should they be expected to distinguish between domestic insurers, branches and freedom of services providers when assessing the security of their coverage.

• Third, they support the proper functioning of integrated markets and contribute to financial stability through orderly outcomes when failures occur.

Insurance Guarantee Schemes also serve a broader purpose. In Europe, insurers can operate with one license in one Member States in all 30 countries of the European Economic Area. Yet policyholder protection remains fragmented.

Such fragmentation creates uncertainty for consumers and can undermine confidence in cross-border insurance activity. Indeed, in case of failure, policyholders need to go through a period of uncertainty on what will still be covered or not, while waiting for a liquidator to finalise the wind-down. After that, they may recover losses or need to manage a haircut.

This is one of the reasons why the European discussion on Insurance Guarantee Schemes has been ongoing for well over a decade. Since the European Commission's White Paper on Insurance Guarantee Schemes and EIOPA's early work on cross-border cooperation mechanisms, substantial progress has been made. More recently, EIOPA's policy work, including our Advice to the European Commission, has consistently advocated a framework based on common minimum standards.

Not a single European scheme. Not a one-size-fits-all approach.

But a network of national schemes adequately funded, capable of providing a coherent minimum

level of policyholder protection across the Single Market while preserving national flexibility.

• But the argument for Insurance Guarantee Schemes goes beyond the European Single Market.

As I noted earlier, insurer failures are no longer solely a sectoral concern. The role of insurance within the financial system has evolved significantly. Furthermore, in a world characterised by alternative investments, private credit, private equity and growing interconnectedness across financial sectors, the orderly management of insurer failures has become relevant not only for policyholder protection but also for supporting financial stability more broadly. This growing recognition is reflected in the work of the FSB and in the inclusion of insurance within the FSB Key Attributes framework.

And that brings us back to where we started. Insurance failures will continue to occur, both in Europe and around the world. The question is not whether failures can be prevented entirely. The question is whether policyholders remain protected, confidence is preserved and markets continue to function when those failures occur.

This is precisely the value that Insurance Guarantee Schemes provide. They are the last line of defence when all other safeguards have been exhausted, and they remain an essential component of a resilient insurance sector and a stable financial system.

Let me conclude.

The debate on Insurance Guarantee Schemes is not only about compensation mechanisms.

• It is also about confidence; a topic closely intertwined with IGSs that has come up several times in my speech.

Confidence that policyholders will continue to receive meaningful protection when things go wrong.

Confidence that insurer failures can be managed in an orderly manner. And confidence that an increasingly interconnected financial system remains resilient even when individual institutions fail.

This is why effective policyholder protection arrangements remain an essential complement to

supervision, prudential regulation and resolution frameworks.

It is also why the discussion on a minimum baseline for Insurance Guarantee Schemes, in Europe and globally, remains highly relevant for us.

Throughout this journey, EIOPA has greatly benefited from its close cooperation with IFIGS. The practical experience, insights and lessons shared by members of this forum have played an important role in informing our thinking and strengthening our policy work on Insurance Guarantee Schemes. For that, I would like to express my sincere appreciation.

We look forward to continuing this collaboration with IFIGS and our international partners as we work towards stronger policyholder protection, greater confidence and more resilient insurance markets.

Thank you very much.