A decade after Bermuda gained full Solvency II equivalence, a report commissioned by the Association of Bermuda Insurers and Reinsurers is arguing that the status should be treated as an ongoing relationship rather than a past achievement.

The report, Ten Years of Solvency II Equivalence, was produced by the Centre for European Policy Studies and the European Capital Markets Institute. It examines the role of the European Union’s regulatory-recognition framework that allows insurers to use reinsurance capacity outside the bloc.

Bermuda and Switzerland are the only non-EU jurisdictions to hold full equivalence under all three parts of the framework: reinsurance, group solvency and group supervision.

Mark Cloutier, Abir chairman, said the status was important to Bermuda’s commercial market and the wider economy.

“Without equivalence, our commercial reinsurers and groups would face much higher regulatory and administrative hurdles, making it more difficult to write business into the important European market,” he said.

It only applies to Bermuda’s commercial re/insurance regime, and not captive or special purpose insurers.

Solvency II equivalence does not give Bermuda companies automatic access to the European market. Instead, it allows EU regulators to rely on another jurisdiction’s supervisory system where the outcomes are the same. This reduces the need for them to duplicate regulations.

John Huff, Abir’s president and chief executive, said the framework gives European insurers access to a broader range of counterparties, capital sources and specialist expertise.

“The ‘outcomes-based’ spirit of Solvency II equivalence has helped the EU to rely on another jurisdiction’s regulatory and supervisory framework to achieve sufficiently comparable outcomes,” he said.

“Regulators from different countries effectively say to each other, although we might not take the same route, we reach the same destination.”

The report puts figures around that relationship. At the end of 2024, Bermuda’s 392 commercial re/insurers held €1.85 trillion (about $2 trillion) in total assets and €323 billion in capital and surplus, while writing €304 billion in gross premiums.

Between 2016 and 2025, Bermuda commercial re/insurers incurred about €80 billion in gross claims relating to EU entities, according to the report. Of that total, €60 billion related to property and casualty business and €20 billion to long-term business.

The report also cited Abir data estimating that Bermudian-based re/insurers account for about 20 per cent of broker-placed European property-catastrophe reinsurance.

That capacity has relevance as the EU looks to narrow the protection gap, meaning the gap between economic losses from natural disasters and the portion covered by insurance.

The report notes that reinsurance can help primary insurers and national schemes distribute risk to geographically diverse balance sheets, but cannot close the protection gap on its own. That is because risks must first be insured before they can be transferred.

It also points to Bermuda Monetary Authority stress-testing results as evidence of the market’s loss-absorbing capacity. Bermuda commercial re/insurers assumed €212 billion of gross catastrophe-loss exposure in 2024, while the BMA found the market had enough capital under severe scenarios to meet its obligations and capital requirements.

The report links that resilience to the BMA’s evolution of its regime, including enhancements to group supervision, public disclosure, recovery planning, large-block reinsurance transactions and liquidity-risk management.

However, the report questions whether equivalence is reflected in legislation. For instance, under credit-risk-transfer and securitisation rules, Bermuda re/insurers may still face restrictions even though their regime has already been recognised in the EU.

That follows Abir’s March call for changes to proposed EU securitisation rules, which it said could prevent EU-authorised insurers headquartered in Bermuda and Switzerland from providing credit protection to banks.

Earlier this month, David Burt, the Premier and Minister of Finance, travelled to Belgium to mark the tenth anniversary of Bermuda acquiring the recognition.

Apostolos Thomadakis, the report’s author and a senior research fellow at CEPS, said regulatory openness did not require lower standards.

“High standards simply do not have to look identical in all countries,” he said.

The report cautioned that it could not prove that Solvency II equivalence itself caused particular volumes of claims, premiums or capacity. It said, however, that the framework helps to reduce regulatory obstacles.

• See the full report under Related Media

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Ten Years of Solvency II Equivalency