f Bermuda fails to secure Solvency 2 equivalency it will be highly likely to be due to the "arcane" politics of Europe.

That is according to Jeremy Cox, CEOof the Bermuda Monetary Authority (BMA), who was the keynote speaker at the Bermuda Insurance Institute's spring luncheon held at the Fairmont Hamilton Princess yesterday.

Mr. Cox, who was talking on the subject of "Guarding the Bermuda brand The BMA's approach to reputational risk", said that if the Island did not get equivalence, it would not be through lack of technical expertise.

"If we continue to do all that is being asked of us, if the Solvency 2 assessors who will be visiting later this year give us a passing grade, there is no technical impediment that I am aware of that will prevent us from being granted equivalence," he said. "Said another way, if Bermuda does not get equivalence, it will not be because we lack the technical expertise. It will not be because we have a record of corporate failures. Our record indicates the opposite.

"It will not be because we have lost the support of the marketplace. We continue to attract new business and to add new companies to our register.

"If Bermuda fails to secure equivalency, it is highly likely to be due to the arcane politics of Europe. After all, what other reason could there be to exclude a respectable jurisdiction with an industry that provides an estimated ten percent of broker market reinsurance capacity to the European market, an estimated 40 percent of windstorm and flood reinsurance to Europe's leading property and casualty insurers and which employs approximately 7,000 people in the EU?"

>Mr. Cox said the biggest challenge facing the Island now and in the future was achieving equivalence to the Solvency 2 Directive governing solvency requirements for insurers operating throughout Europe.

Mr. Cox detailed the work the BMA had done to meet Solvency 2 standards through significant enhancements to insurance solvency and disclosure regulations announced in August 2008, through The Insurance Amendment Act 2008 introducing new and expanded regulatory initiatives and the Bermuda Solvency Capital Requirement (BSCR), which was an enhanced solvency regime applicable to the Class 4 licence holders.

At the same time, he said, the legislation reclassified Bermuda's Class 3 insurance sector, which includes a large number of firms ranging from captives writing a limited amount of third-party business to large, purely commercial re/insurers. Along with this reclassification, the Authority introduced a new category of 'Special Purpose Insurer' focused on fully collateralised special purpose vehicles that were established to conduct certain specific insurance transactions.

And more recently in the BMA's 2010 Business Plan, it explained that a key part of the equivalence effort would include the introduction of group supervision for Bermuda's largest insurers, to ensure that all the risks related to a particular insurance group are considered in its supervisory process.

"Our brand, our reputation is largely in our hands and is, therefore, always a work in progress," said Mr.Cox.

"That said, I think it is particularly important that everyone understands the Authority's brand: its risk-based approach to regulation which remains effective for the Bermuda market. It is this approach that allows us to differentiate between captive and commercial supervision and to allocate resources efficiently to firms with higher risk profiles.

"Currently there's an expectation that Bermuda's regulator needs to communicate that he has wide powers and real teeth, that he is able to stand shoulder to shoulder with international regulators, and that he is ready to apply his powers or as one CEO put it the other day, show that he is willing to hold CEOs accountable and is prepared to heavily penalise those who engage in imprudent practices.

"I will resist the temptation to say 'be careful what you wish for' because I believe that all of that is true. I do have to provide that context for our global insurers. But I also believe we are at another cross roads in the development of the Bermuda insurance industry and I think that the best way I can guard the Bermuda brand is simply to continue to demonstrate the competency, accomplishments and technical strength of the BMA, its people and its tough risk-based regulatory framework."