Bermuda insurance companies need to be making strategic plans that may involve restructuring in order to ensure that imminent sweeping changes to European Union regulation of the industry do not put them at a competitive disadvantage.

But the opportunities are great for those who plan ahead to deal with the repercussions of Solvency II, a new EU regulatory standard for insurers, scheduled to take effect in 2012.

That is the view of Jane Portas, director of general insurance of global accountancy firm KPMG, who advised all insurers to plan and prepare for the new regulatory environment, a process which she said would be "fantastically healthy" for companies as they examined the efficiency of their own structures.

Companies will need to consider options as to organisational structure, as well as where they hold their capital and in what form.

"Solvency II will be one of the catalysts to inspire firms to take a strategic approach," Ms Portas said.

Solvency II will create a single regulatory standard for insurance services throughout the 27 member states of the EU. With the aim of protecting policyholders' interests and enhancing financial stability of the insurance sector, it will focus on risk-based capital requirement, transparency and risk management.

Financial regulator the Bermuda Monetary Authority has been working closely with commercial insurers and reinsurers on shaping regulation to match the Solvency II standard, so that the Island qualifies for regulatory equivalence under the new rules.

Last week Ace Ltd., whose principal executive offices are in Bermuda, completed the redomestication of its holding company from the Cayman Islands to Switzerland, citing regulatory benefits as one of the reasons for the move. Although Switzerland is a non-EU country, it already has in place its Swiss Solvency Test, which anticipates the requirements of Solvency II.

But what's good for Ace might not necessarily be the right solution for other companies, said Richard Lightowler, head of insurance practice at KPMG's Bermuda offices.

"What Ace has done is not necessarily indicative of what we are going to see," Mr. Lightowler said. "Every organisation is different.

"It would be misleading to say that organisations in Bermuda are not looking at how they structure their groups. They should be doing that all the time — the world is always changing."

The flip-side, he added, was that some European companies might consider redomiciling their holding companies to Bermuda to improve their corporate structure or tax situation, as several Lloyd's of London operators already have done.

"Every responsible board will be doing a strategic review," Mr. Lightowler said. "Companies in Bermuda are very new compared to those in Europe and so restructuring for them should be less complex , as they will have less legacy issues.

"Also, I think Bermuda companies, when they make acquisitions, will have to consider the Solvency II implications of that expansion."

Ms Portas, together with Steve Seabrooke, KPMG's head of general insurance tax, will be meeting this week with representatives of Bermuda companies to offer advice on business strategy relating to Solvency II, as well as the ever-changing taxation environment.

KPMG has produced an advisory White Paper entitled "Strategic Restructuring and Redomestication For Insurers". A key chapter focuses on restructuring and redomesticating trends. Ms Portas described three of those trends.

"First, there is consolidation and streamlining," Ms Portas said. "How do I clean up and simplify my group?" A key consideration was the platforms available to access European business.

"Second is redomestication," she added. "How can I get my profits into the most effective domiciles, through group reinsurance, for example?

"Third is group and capital structures, featuring holding companies. This approach involves building the most effective business platforms and then putting a holding company and capital structure on top of that, considering the effectiveness of that structure from a regulatory and tax perspective."

One controversial, and hotly debated, aspect of the Solvency II is "group support". This proposal is still being formalised but would allow solvency capital to be held at the group level, thereby reducing the capital requirement for operating entities. This presented "fantastic opportunities" for Bermuda-based groups, Ms Portas said, if extended to equivalent countries and provided the Island could achieve Solvency II equivalence.

The KPMG White Paper also focuses on how the tax environment influences insurance structures and how to achieve implementation of a restructuring strategy. The message is that each company needs to find its own solution. As Ms Portas explained: "There is no 'one size fits all'."