BMA’s Cox: Solvency II equivalence will make us a more attractive jurisdiction

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The head of the Bermuda Monetary Authority (BMA) says Bermuda is making itself more attractive to international business by becoming Solvency II equivalent.

During a panel discussion at the Bermuda Captives Conference yesterday, BMA CEO, Jeremy Cox told an audience that while Bermuda regulators have been pushing ahead to be ready to meet the European Union’s Solvency II equivalence requirements, other domiciles have not — and that may work to Bermuda’s benefit.

“People are still trying to understand the potential impact of what we’ve done in terms of equivalence and what impact it will have on the sector. So we’ve got to continue to do a good job of communicating the reality as opposed to the perceptions,” Mr Cox said. “We have some mischief makers out there — some competitor jurisdictions — that wish people to believe that Bermuda’s following a path that will destroy its captive sector. The reasons are obvious why one would do that but certainly, as I mentioned before, we’re not planning on doing that.”

Solvency II is the name given to new EU regulations for the insurance industry that will introduce enhanced capital and corporate governance requirements. Captive insurers, which largely provide self-insurance for their parent corporations, have argued their case in Brussels that they should not be subject to the same stringent regulations as commercial re/insurers covering third-party risks.

The Europeans have suggested that they will consider “segmented” equivalence for Bermuda, that would allow captives to be treated differently.

Laurence Bird, president of the Bermuda Insurance Managers Association (BIMA) said he thinks not complying with the new regulations will hurt other competing domiciles.

“In terms of a couple of mischief makers — or noisy friends of ours in Cayman and Guernsey, specifically, they’ve both put their flags in the sand and said, ‘We’re not going to be Solvency II equivalent, look at Bermuda what are they doing? Why are you going there? You should come to us.’ Now I think that’s going to backfire, but that’s my personal view,” Mr Bird said.

The panel discussion, which focused on Bermuda, Solvency II equivalence and its affects on the re/insurance and captive sectors of the insurance industry had a recurring theme: reputation and credibility, something all on the panel agreed are Bermuda’s strong suits.

“I can’t speak to the strategies that Cayman and Guernsey have adopted but I can refer you to my comments earlier highlighting the benefits of having a seat at the table, the benefits of being trusted and the benefits of being credible,” Mr Cox said. “Those out there in the industry, those regulators that may be out there that think that they can hide under a radar — those days are gone. And, in my view, it’s far better to put yourself in a position where you are trusted or credible and can be relied on because remember equivalence means a lot.”

“You really can’t put a price tag on credibility,” said panellist Leila Madeiros, deputy director of the Association of Bermuda’s Insurers and Reinsurers (ABIR). “I think it’s so significant that Bermuda was selected to be reviewed and assessed in the first wave with Switzerland and Japan. There is an opportunity in the captive market for equivalence. Not if, but when Bermuda is deemed equivalent, we may see increased interest in captives from Europe because then they can base themselves in Bermuda without a penalty.”

“This goes far beyond just insurance,” Mr Cox said. “It’s almost like Bermuda’s trying or has achieved a sort of rebranding that represents credibility and high quality.

“I think that we are on a path that really will put this country in a tremendous position, not only from an insurance perspective, but also from some of these other industries like the fund sector. So I hope you have your teams in place to take some of this business that I believe is going to be coming.”

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