Solvency II
The directive amending the Solvency II legal framework was published in the Official Journal of the European Union on 8 January 2025 and entered into force on 29 January 2025. EU Member States are required to transpose the new Solvency II rules into national law following a two-year transposition period, with the rules applying from 30 January 2027. During the years 2025 and 2026, approximately 80 Level 2 and Level 3 legal instruments (in particular regulatory and implementing technical standards and guidelines) will be newly created or revised in connection with the revised Solvency II Directive. These instruments will become legally binding once they have been adopted by the European Commission and published in the Official Journal of the European Union.
The Solvency II Directive has, among other things, adopted adjustments to the standard formula for the calculation of its Solvency Capital Requirement in order to better mitigate pro-cyclical effects. The purpose is to avoid unnecessary capital burdens by adapting assessment methodologies more closely to the real risks of the European insurance industry. Liquidity risk management plans are to be introduced to monitor liquidity risks in the future, with appropriate measures that are necessary to restore liquidity and ensure compliance with the law.
Recovery and resolution
The directive establishing a framework for the recovery and resolution of (re-)insurance undertakings was published in the Official Journal of the European Union on 8 January 2025 and entered into force on 29 January 2025. EU Member States are required to transpose the new rules into national law following a two-year transposition period, with the rules applying from 30 January 2027. During the years 2025 and 2026, approximately 20 Level 2 and Level 3 legal instruments (in particular regulatory and implementing technical standards and guidelines) will be developed in relation to the Insurance Recovery and Resolution Directive. These instruments will become legally binding once they have been adopted by the European Commission and published in the Official Journal of the European Union.
The purpose of this Directive is to prepare (re-)insurance undertakings for crisis situations and to enable an orderly exit from the market in the event of failure without recourse to public funds by providing the competent authorities with effective resolution tools and powers which allow for appropriate early intervention in the event of an insurer failing or likely to fail and thereby minimising negative effects on policy holders, financial markets, the wider economy and on budgets of the Member States.
The Insurance Recovery and Resolution Directive requires (re-)insurance undertakings to draw up pre-emptive recovery plans before a breach of the Solvency Capital Requirement (SCR); at group level, corresponding group recovery plans must be submitted to the group supervisor. If a (re-)insurance group carries out critical functions in the public interest, the relevant group resolution authority shall draw up group resolution plans in which impediments to resolvability are addressed and removed.
In the context of ongoing regulatory developments, the Insurance Recovery and Resolution Directive provides that the European Commission shall submit a report to the European Parliament and the Council by 29 January 2027 at the latest, after having consulted with EIOPA. The purpose of this report is to assess the appropriateness of minimum common standards for insurance guarantee schemes (IGS) within the European Union.
Sustainable finance
A range of comprehensive European legislative initiatives have been introduced in recent years under the “European Green Deal”. Against the background of the initiative to reduce red tape, some of these regulations were reviewed during the reporting period and partially adjusted.
On 26 February 2026, the final EU directive of the Omnibus I simplification package in the field of sustainability was published in the Official Journal of the European Union. The package of measures presented by the European Commission in February 2025 aims to simplify and harmonise more closely sustainability-related regulatory requirements for companies.
The aim of this initiative is to strengthen the competitiveness of European companies without jeopardising the overall sustainability objectives of the European Union. In terms of content, the focus is in particular on adjustments to the requirements for sustainability reporting and corporate due diligence obligations. The main focus is on the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). In addition, the package includes simplifications of the report formats and reporting templates within the framework of the EU Taxonomy.
The European Sustainability Reporting Standards (ESRS), which are being adapted as part of the CSRD revision, are expected to be mandatory for the first time in the 2027 reporting year. The rules of the CSDDD will apply from mid-2029. The simplified reporting templates for the EU Taxonomy have already been used for the 2025 financial year.
Digital resilience
The regulation of digital security in the financial sector remained a focus at the European level during the reporting period. Since 17 January 2025, the Digital Operational Resilience Act (DORA) has been applicable to European financial entities, requiring them, among other things, to take all required security precautions to mitigate cyber attacks and other risks in the area of information and communication technology (ICT risks). Essential details for the provisions in DORA are set at level 2. These level 2 measures were developed by the ESAs (EIOPA, EBA and ESMA) in the course of 2024 in a joint committee. They became legally binding upon their adoption by the European Commission and subsequent publication in the Official Journal of the European Union.
International sanctions
After significant changes to the dynamics, complexity and extent of the international sanctions environment as a result of Russia’s attack on Ukraine in 2022, multiple countries and organisations, above all the European Union, the United States of America and the United Kingdom of Great Britain and Northern Ireland, imposed further comprehensive sanctions against Russia and Belarus or expanded already existing sanctions in the reporting year. The restrictions rang from (investment) restrictions for specific economic sectors to embargoes on goods, complete trade embargoes for specific regions to the significant expansion of the number of persons and companies that were placed on sanctions lists and with whom business relationships are therefore prohibited. As in the previous year, the European Union, the United States of America and the United Kingdom of Great Britain and Northern Ireland again stepped up their efforts to prevent sanctions being circumvented. In this context, in 2025, numerous individuals, companies and vessels domiciled or registered outside Russia and Belarus were sanctioned. In some cases, this also includes persons who are nationals of an EU country or companies with their registered office in the EU. Iran was also the focus of sanctions again in 2025. Against the background of the failed nuclear negotiations, the “snapback mechanism” provided for by the Joint Comprehensive Plan of Action (JCPOA) was triggered, which led to the reactivation of the comprehensive sanctions of the United Nations Security Council against Iran, which had been suspended since 2015. This meant further sanctions for persons or companies in Iran or related to Iran. In Austria, the Sanctions Act 2024 introduced new provisions relating to sanctions, which, among other things, require insurance companies to establish strategies, controls and procedures to ensure compliance with financial sanctions. The Sanctions Act 2024 came into force for insurance companies on 1 January 2026. Furthermore, the act transferred the powers for the monitoring and enforcement of financial sanctions in the financial sector from the National Bank of Austria to the FMA as of 1 January 2026.