Bermuda closer to Solvency II equivalence
Bermuda has taken a step closer to getting in line with EU rules on insurance firms' capital and solvency.
The European Insurance and Occupational Pension Authority (EIOPA) endorsed key aspects of the Island's insurance and reinsurance regulatory regime — with some reservations.
The EU Solvency II directive is due to come into force in 2016 — and failure to meet the standards would mean Bermuda-based commercial insurers would no longer be able to do business in Europe.
Bermuda Monetary Authority CEO Jeremy Cox said: “Equivalence with the Solvency II directive is of the utmost importance for Bermuda.
“This designation ensures that Bermuda's commercial insurers may continue to transact business within the European Union.
“Moreover, equivalence is of benefit to the EU and its citizens as it enhances the provision of well-regulated, stable insurance capacity.
“Equivalence also substantively strengthens the level of cooperation and trust between international insurance supervisors, as well as the cross-border efficiencies and effectiveness of supervision between jurisdictions.”
Mr Cox added: “This milestone is a major development for Bermuda and its well-deserved reputation as the world's risk capital.”
Bermuda is one of only two non-EU countries to have asked for equivalence under all three articles of the EU directive.
Compliance with the new rules means that Bermuda insurance and reinsurance contracts will be treated the same as those made in the European Economic Area (EEA).
Bermuda will also be in line with group solvency requirements for Bermuda insurers and reinsurers and group supervision of EEA insurers with parent companies outside the EEA.
The EIOPA recommendation only addresses Bermuda's commercial insurers and reinsurers — Class 3A, 3B, and 4 insurers and long-term or life Class C, D and E.
Mr Cox said: “The Authority welcomes the progress that has been made in the Solvency II equivalence process.
“We acknowledge the significance of the Solvency II directive and its goal of codifying and harmonising EU insurance regulation and remain firmly committed to ensuring that the Authority does everything in its power to work towards full equivalence for Bermuda by the implementation date of January 1, 2016.”
Mr Cox added that the timetable for Bermuda to meet the standards was “far more aggressive” than that for EU member states, the BMA had “learned a great deal from the experience of being a first mover in this initiative.”
And he said: “As we continue to work towards full equivalence, it is my hope that this first-mover status earns Bermuda credit as a strong supporter of the EU's push for greater supervisory harmony and financial stability.”