European Commission finds Bermuda fully equivalent for Solvency II

The insurance and reinsurance industry has applauded the decision by the European Commission to find Bermuda and the Bermuda Monetary Authority (BMA) to be fully equivalent under the Solvency II regulatory regime.

Bermuda and Switzerland, both considered key hubs for insurance and reinsurance, as well as for the insurance-linked securities (ILS) market, are the only two jurisdictions to be found fully equivalent under the European Union’s Solvency II regulatory and supervisory system for insurers, which comes into effect on 1st January 2016, so far.

For Bermudian insurers and reinsurers it means an ability to operate in a business as usual manner, under Solvency II, with the risk capacity provided by the Bermuda reinsurance market still able to flow into Europe to take its share of major risks and programs.

Bradley Kading, President and Executive Director at the Association of Bermuda Insurers and Reinsurers (ABIR), explained the importance of the decision; “Solvency 2 equivalence for Bermuda will ensure competitive markets and better prices for European businesses and consumers. ABIR members provide significant amounts of reinsurance capacity to European based insurers. Bermuda companies provided 20% of the recent UK Pool Re terrorism reinsurance placement and historically have supplied 20% of the European property catastrophe reinsurance market. In addition Bermuda insurers have covered between 20% and 50% of recent European based airline and ocean marine catastrophic losses.”

Other industry leaders have applauded the decision to grant equivalence to Bermuda.

Jo Willaert, President of the Federation of European Risk Management Associations (FERMA), said; “It is of great importance that European industrial and financial business entities have continued access to important commercial insurance and reinsurance capacity from Bermuda commercial insurers and reinsurers. FERMA, therefore, welcomes the decision of the European Commission to grant a full equivalence decision of the Bermudian supervisory system in relation to articles 172, 227 and 260 of the Solvency II Directive.

“Since 2010 and its response to the first CEIOPS consultation on Equivalency Assessment for certain third countries (CEIOPS – CP 81), FERMA has been determined to ensure that the coverage of risks for large European corporations remains available and affordable in order to protect the competitiveness of European industries. It also protects their resilience in the event of catastrophic losses as large claims payments are made into the EU economy. The protection of European businesses will be strengthened by the equivalence decision from the European Commission.”

David Matcham, CEO of the International Underwriting Association (IUA) in London commented; “The Bermudian reinsurance market is an important source of diversification in reinsurance capacity for the international insurance market and for European insurers. Bermudian equivalence will ensure market access and be helpful for EU consumers. We’d encourage the Commission and Council to expedite their comments, if any, on the delegated act so equivalence can move ahead.”

Hugh Savill, Director of Regulation at the Association of British Insurers (ABI) in London, added; “Given the close and mutually beneficial relationship between the London market and Bermuda, the publication by the European Commission of its proposals on Solvency II equivalence for Bermuda is really good news. 2016 is nearly upon us so we hope to see these proposals promptly adopted.”

Robert Paton, President of the Bermuda Insurance Management Association (BIMA), stated; “The announcement of the delegated Acts in relation to Solvency II equivalence is a further example of the leading role taken by the Bermuda Monetary Authority in ensuring that the Bermuda Insurance and Reinsurance market remains at the forefront of global supervision. The Bermuda Insurance Management Association applauds the BMA’s vision, leadership and tenacity in achieving a bi-furcated risk based, pragmatic regulatory regime appropriate for both the Bermuda Commercial and Limited Purpose Insurer markets.”

Wendy Outerbridge, Corporate Secretary for the Bermuda International Long Term Insurers and Reinsurers Association (BILTIR), said; “The Bermuda International Long Term Insurers and Reinsurers Association (BILTIR) congratulates the Bermuda Monetary Authority (BMA) on obtaining equivalence with the European Union’s Solvency II prudential regulation regime. Equivalency is a significant achievement for Bermuda which will allow its insurance industry to compete more effectively in the global marketplace. The BMA has demonstrated its dedication and commitment to the industry in achieving this goal. BILTIR has been pleased to work with the BMA on this initiative over the past several years, and we are excited about the future opportunities this will bring to Bermuda.”

The industry clearly understands the important role that Bermuda plays as a hub for reinsurance, a source of risk capital and a home of underwriting expertise.

With Bermuda also a home to and conduit for significant amounts of the world’s collateralized reinsurance or insurance-linked securities (ILS) capacity, it is important that the jurisdiction is able to continue to operate on a level playing field as regulatory regimes adjust and are updated.

Jeremy Cox, Chief Executive Officer of the Bermuda Monetary Authority, stated; “This is significant news for Bermuda and the island’s future as a strong financial services centre. It’s an exciting time for us. The world is watching to see how Europe will transform its risk industry and improve the protection of its policyholders. The world will also be watching to see how Bermuda plays its part in this epic transformation. It has been a long journey and an incredible amount of work has gone into this over the past six years. At the Authority, we are delighted that it is now on the brink of successful completion.

“Solvency II equivalence would mean Bermuda’s commercial (re)insurers and insurance groups will not be disadvantaged when competing for, and writing, business in the EU. Being an early adopter of Solvency II has granted certainty to commercial (re)insurers operating from Bermuda.

“Bermuda has worked long and hard to become a global risk marketplace. It is extremely fortunate to have succeeded in becoming the world’s leading Insurance Linked Securities market, premiere captive domicile, as well as a global (re)insurance hub. The Authority has ensured that these important markets are being supervised appropriately.

“The Authority has always performed the role of gatekeeper to a very high standard. But this achievement marks not only our supervisory expertise but also our ability to stay focused and keep our eye on the long-term prize. There is now no doubt as to the calibre of commercial (re)insurers operating from Bermuda or the quality of their regulatory environment.”