Inspectors from the European Union were in Bermuda last week for an on-site vetting of the Island’s insurance regulation.The visit was part of the assessment process as Bermuda bids for “third-country equivalency” with Europe’s enhanced Solvency II rules for insurers, due to be introduced in 2013.Speaking yesterday on a panel at the Bermuda Captive Conference, Bermuda Monetary Authority (BMA) chief executive officer Jeremy Cox told delegates of the European inspectors’ visit, without going into detail.Premier Paula Cox, also a panellist, revealed that she will head a delegation to Brussels later this month for further Bermuda-EU dialogue.As the Island’s financial regulator, the BMA has been following a “road map” towards the goal of equivalency over recent years, with the aim of ensuring that Bermuda-based commercial re/insurers will not be at a competitive disadvantage when they do business in the EU.The Association of Bermuda Insurers and Reinsurers (ABIR) has estimated that its member companies write about 40 percent of Europe’s broker-placed property and catastrophe reinsurance business.Mr Cox’s comments touched on the Solvency II aspect of most concern to his audience at the Fairmont Southampton, whether and how the new rules will differentiate between captives and commercial insurers.Captives insure mainly the risks of the corporations that own them and have a lower risk profile than commercial re/insurers writing third-party business. Therefore captive organisations, such as the Bermuda Insurance Managers Association, believe their members should be subject to the same increased capital requirements that Solvency II will foist on commercial re/insurers.Mr Cox said he could not reveal details of last week’s on-site review, but said: “We had a very, very tough week. These assessments are not easy. A large part of the week was spent looking at elements of proportionality and how it applies to Class 4 companies versus captive companies”.The “principle of proportionality” is the element of the new rules that captive managers hope will take account of their lower risk profile and so differentiate regulation appropriately.Mr Cox said it was clear from the discussions between the BMA and the EU authorities that “there is still a learning process that needs to take place”.He added: “A lot of the challenge for the regulatory community is understanding the captive concept. There is a different view of captives in Europe than what you would have in North America.”Most rival captive jurisdictions are not pursuing equivalency. But Mr Cox said he believed that the assessment process would reap great dividends for Bermuda, despite the doubts of some who felt it could erode the jurisdiction’s edge.The aim of the International Association of Insurance Supervisors (IAIS), on whose executive committee Bermuda has a seat, was to achieve “mutual recognition”, meaning that insurance regulators around the world had a common language based on standards that all jurisdictions could adhere to, Mr Cox said.Being among the first countries to be assessed for Solvency II equivalency represented a major step forward for Bermuda in this regard, he added.Ace Bermuda CEO Rees Fletcher said he supported the BMA’s drive for equivalency. A wave of new regulation was inevitable after the financial crisis and Solvency II was a good option for the industry, in that it was a global system and would bring benefits to Bermuda.Mr Fletcher predicted that more jurisdictions would accept the Solvency II standard and that, in time, the US would probably recognise it too.Meanwhile, in comments published in the run-up to the conference, an executive with one of the conference’s sponsors, credit ratings agency AM Best Co, said Bermuda could become the first domicile in the Western hemisphere to achieve equivalence.Bermuda’s work in striving to meet Solvency II requirements had dimmed the negative association between offshore captives and tax havens, Mr Chirico said. “The Solvency II work has taken a lot of that off the table,” he said. “It shows that they aren’t fooling around. Whether or not those rules apply to captives, it took a lot of insight for regulators to pursue Solvency II equivalency.”