The high cost of meeting international standards on insurance regulation is a concern, ratings agency AM Best said today.

And a special report on the Island’s bid to achieve Solvency II equivalence in the EU added that there was still a perception that regulators continued to duplicate each other’s work, despite advances toward group supervision.

The AM Best report came out only weeks after it was announced that Bermuda was in the final stages of EU approval, which would mean that the supervisory regime for insurance and reinsurance on the Island would be given equal status with Europe.

The report said that, while Bermuda’s achievement of qualified jurisdiction status in the US and probable Solvency II equivalence will provide a level playing field for business transacted in the US and the EU, other regulatory concerns remain.

But it added: “The achievement of Solvency II equivalence will provide the Bermuda commercial reinsurance sector confirmation that the EU views them as equivalent to reinsurance companies that are regulated by EU member states.

“In addition to the financial benefit of reduced collateral requirements for business ceded by EU companies, equivalence will also confirm that Bermuda will remain a major platform for global reinsurance companies, who can transact business in the EU as easily as an EU-based reinsurer.

“This is a positive development for the market profile of Bermuda-domiciled entities, which is an important element of AM Best’s rating criteria.

“Equivalence is particularly important for Bermuda where international business is the nation’s largest industry.”

Countries who want to level the business playing field in the EU have to apply for equivalency and the EU reviews its laws, regulations and oversight by local regulators before making recommendations.

Switzerland is so far the only country to be given full equivalence.

A number of other countries, including Bermuda, are seeking equivalence and are various stages in the process.

Bermuda is in the final stages with a delegated act already sent to the EU Parliament and EU Council for a three-month scrutiny period before a final decision is made.

If — as is likely — the act is accepted, Bermuda will gain full equivalence with Solvency II for insurers and reinsurers from the start of next year, although captives and special purpose insurers would be excluded.

The report also noted that the Island, from the start of this year, was given qualified jurisdiction status from the US National Association of Insurance Commissioners after a similar review of Island’s laws and regulations.

As a result, Bermuda reinsurers have reduced capital requirements for US claims, provided the reinsurer is evaluated and certified.