Bermuda Insurance Prepares For EU Recognition

by Robin Pilgrim, LawAndTax-News.com, London

26 March 2010

The Bermuda Monetary Authority (BMA) is continuing a programme of regulatory reforms for the Bermuda insurance market place in order to 'meet or exceed international standards', with new legislation already being set in motion.

Efforts are concentrated on achieving Solvency II equivalence, since these new European Union (EU) rules are expected to become the key international standard when introduced at the end of 2012. However the US Reinsurance Modernization Initiative is also being monitored closely alongside developments elsewhere.

The BMA says that having a risk-based regulatory regime that is regarded as equivalent by other regulators would bring significant benefits to Bermuda, including:

• The ability to compete in global markets on a non-discriminatory basis;
• Minimizing the risk of multiple capital requirements;
• Removing the need for group solvency calculations on a number of different regulatory bases; and
• Improved ability to optimise group capital and increased fungibility.

In the area of disclosure, the BMA's current plan is to adopt a multi-phased approach recognizing that enhancements in international standards are due to take place over an extended time frame.

The regulatory regime the BMA are seeking to create would have three core components:

• Capital Adequacy – whereby capital requirements have regard to all aspects of risk, including group risk, and take into account the quality of capital supporting the business;
• Governance and Risk Management – risk management reflecting the integration of risk and capital management; and
• Disclosure - transparency on the part of both the regulator and the supervised firms.

Jeremy Cox, CEO of the BMA, told the Financial Times last week: "I'm extremely confident about our ability to implement a Solvency II-like regime within the timeframe required."

He continued: "The decision for equivalence rests with Europe, but I can tell you that there will be no technical basis for anyone to say Bermuda should not be granted equivalence."

Cox also told the Financial Times that he wanted his staff to hold leading roles among global regulatory bodies and participate in the sharing of information worldwide. To this end a memorandum of understanding was signed with Monica Mächler of the Swiss financial regulator at the World Insurance Forum event in Bermuda.

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