Bermuda will be able to gain third-country equivalency with Solvency II for regulation of its major commercial re/insurance market without having to apply the more stringent supervision standards to the Island’s captives.That was the message yesterday from Karel Van Hulle, the European Commission’s head of unit for insurance and pensions, who said at a conference in Hamilton that “segmented equivalency” was allowable.In a presentation at the Bermuda Monetary Authority (BMA) Regulatory Forum at the Fairmont Hamilton Princess Hotel, Mr Van Hulle also fuelled optimism that Bermuda will earn equivalency by stating that the Island is in the “first league” of countries in terms of its insurance regulation.Solvency II is the name given to enhanced European Union regulations for the insurance industry, due to be introduced in 2013.The changes, aimed at protecting policyholders and guarding against systemic risk, will require some insurers to hold more capital and also include the implementation of higher standards of corporate governance.Bermuda’s insurance regulator, the BMA, has been striving to achieve equivalence to ensure that Bermuda companies writing business in Europe are not competitively disadvantaged.However, it was feared by some that applying the same tougher regime to the Island’s captive insurers, most of whose business is providing insurance coverage to their parent corporations, could damage the Island’s appeal as a captive domicile relative to rival jurisdictions like the Cayman Islands who are not pursuing equivalence.“Mr Van Hulle said the question was made about whether they could give a bifurcated decision on equivalency and he found that they were able to do that,” said BMA CEO Jeremy Cox, speaking on a panel at the Forum. “That is exactly what we want for Bermuda.”Fellow panellist David Ezekiel, chairman of Marsh IAS, a major player in captive management on the Island, said Solvency II equivalence had the potential to adversely impact the captive sector, but it had not done so yet.He said some kind of “carve-out” for the Class 1, 2 and 3 captives made sense, because of their much lower risk profile than the large Class 4 insurers of third-party risks.The fact that there was a segmenting option on the table at all was the result of a lot of hard work by the BMA and the captive sector, he said.Asked if Bermuda had lost any business to Cayman because of the prospective equivalence, Mr Ezekiel said: “No. And I don’t see that happening. For the large-scale captives, Bermuda is the domicile of choice, there is no doubt in my mind about that.“There is a lot of competition out there, not only offshore but also onshore, but I believe that the only real competition we have is ourselves. We just have to keep doing the right things.”Arch Capital CEO Dinos Iordanou, who is also the chairman of the Association of Bermuda Insurers and Reinsurers (ABIR), expressed strong support for the BMA’s equivalence drive.“The ABIR membership is a major league team, playing in the major league,” Mr Iordanou said. “When you play in the major leagues, you can’t have minor league umpiring crews. The BMA is a major league regulator.“Now we have to convince the world that they are worthy of equivalency. Equivalency will bring them to the forefront. We are pretty confident we’re going to get there.”He added that the Island should be a regulation leader, rather than a follower. “On a capital basis and in terms of the quality of personnel we have, the Island is as good as any major insurance and reinsurance centre in the world,” he said.“We can only continue to accomplish that by being part of the movement of change.”Failure to achieve equivalency would have significant consequences for the Island, including more international re/insurers moving their holding companies off island, he said.Alastair Sutton, EU adviser to the Ministry of Finance, said Bermuda, as a British Overseas Territory, was lacked sovereignty, but was nevertheless receiving equal treatment as an insurance domicile in the corridors of power in Brussels.He added that the BMA had “performed miracles” in strengthening its regulation and had positioned itself well to achieve equivalence.Mr Sutton warned: “As we approach decision time, the scrutiny will intensify.”A final decision on equivalence for Bermuda is due in 2013.