Bermuda will not become a more expensive domicile for captive insurers as a result of economic substance rules, the island’s leading financial-services regulator has assured.Jeremy Cox, executive chairman of the Bermuda Monetary Authority, said the island’s commercial insurers and reinsurers would “generally not have a problem” with regulations that require core income-generating activities to take place on island.“But unfortunately some captive insurers may need to make adjustments to the way they operate,” added Mr Cox, speaking at last week’s PwC Insurance Summit.“Interpretation of economic substance provisions by the Government’s Registrar of Companies and determining what constitutes core income-generating activities will be key to the process.“For example, it could be argued that only board and senior management decisions related to core income-generating activities need to be carried out in Bermuda.“Obviously a strict interpretation could drive up cost in the Bermuda captive industry and make the island a less attractive domicile for this business.“However, to date the indications give us cause for optimism that this will not happen.In fact, I’ll go one step further. We will make sure this does not happen.”As of the end of last year, the BMA had a total of 711 active licensed captive insurers on its register as of the end of last year, which wrote around $40 billion in premium.Insurers are already considered subject to certain substance requirements under existing regulatory requirements in Bermuda.Where captives are more vulnerable to substance rules than large commercial re/insurers is their reliance on outsourcing, as many are run by captive management companies.Outsourced service providers have to meet substance requirements that stipulate that employees, office space and on-island expenditure may not be counted multiple times by multiple entities.The Economic Substance Act 2018 was introduced by the Bermuda Government in response to European Union concerns over tax avoidance by multinational corporations.Mr Cox also revealed in his conference speech that Bermuda is set to be given reciprocal jurisdiction status by the National Association of Insurance Commissioners in the US, an advantage for qualifying Bermudian reinsurers who will eventually no longer need to meet partial collateral requirements for reinsuring US cedants.Switzerland and the Japan are the only two other countries being considered for such status, Mr Cox said, giving Bermuda an edge over most of its rival jurisdictions.