Bermuda is "ahead of the game" in its efforts to ensure that it keeps up with international insurance regulation standards.

That is the view of Bradley Kading, president and executive director of the Association of Bermuda Insurers and Reinsurers (ABIR), who is this week attending a meeting of insurance regulators from around the world at the Fairmont Hamilton Princess.

He added that those who believe that Bermuda has "weak regulation" are mistaken, as the Island is making huge strides to meet the highest of international standards.

With the European Union's new regulatory standard for insurers, known as Solvency II, due to take effect in 2012, the Island is positioning itself to comply with the regulations.

Solvency II will create a single regulatory standard for insurance services throughout the EU. Focusing on capital requirements, governance and risk management, and transparency, it will aim to protect policyholders' interests and enhance the financial stability of the insurance sector.

Companies from jurisdictions outside the EU will likely be competitively disadvantaged, if their domicile fails to match the Solvency II standards.

The new EU rules will include an assessment of equivalence of third-country regulation.

Bermuda's financial regulator the Bermuda Monetary Authority (BMA) has been working closely with the industry to strengthen regulation of the Island's insurance market.

For example, the BMA has introduced a risk-based capital model, known as the Bermuda Solvency Capital Requirement (BSCR), as a tool to help companies evaluate their risk profile and the amount of capital they need to ensure they can meet claims.

Class 4 insurers were required to run the BSCR for 2007 year-end and submit the results to the BMA for review. The regulator has recommended to Government that these reporting standards become a legal requirement for Class 4 insurers by the end of this year.

Bermuda's existing solvency regulations take no account of the fact that certain lines of business are riskier than others. It is hoped the BSCR model will rectify that.

"The Authority believes that capital adequacy should properly reflect an insurer's risk profile, including the nature and complexity of the business it writes," states the BMA's 2008-09 Business Plan. "A solvency regime that takes into account the inherent risk of different lines should afford increased protection for policyholders."

In that respect, the BMA's aims are similar to those of the EU's Solvency II.

"Over the last two-and-a-half years, we have been working with the BMA and the Ministry of Finance to make sure that Bermuda qualifies as a regulatory equivalent and great progress has been made," Mr. Kading said.

"Bermuda is ahead of the game. We're doing more than necessary to meet those standards."

He said frequent mentions of Bermuda's "light regulatory touch" and "weak regulation", particularly in the European trade press, was misleading.

"Bermuda's regulatory advantage is about speed to market, allowing companies to get licensed quickly and take advantage of market conditions, not because it has weak regulation," Mr. Kading said.

"That is why we've been successful as a jurisdiction for catastrophe bonds and sidecars, for example.

"Of course, our European competitors don't like to advertise that."

He said if an entity was licensed within 60 days, it was because the BMA was able to carry out its due diligence quickly and efficiently, not because there was a "light regulatory touch".

Bermuda's challenge was to maintain its speed-to-market advantage while introducing the changes needed to match the Solvency II requirements, he added.

Regulators have been discussing how to align international standards this week in Hamilton, where the International Association of Insurance Supervisors (IAIS) has been meeting.

In one of a succession of meetings in various venues around the world, the IAIS Solvency and Actuarial Issues Sub-committee meeting has attracted regulators from countries including the UK, the US, Australia, Germany, Switzerland, the US, Spain, Chile, Japan, Belgium and France.

The IAIS will return to Bermuda when its Reinsurance Transparency Sub-group meets here from April 21-23.