The Bermuda Monetary Authority (the Authority) and several international insurance organizations confirmed the European Commission’s publication of a Delegated Act recognizing the equivalence of Bermuda regulation with the Europe’s Solvency II.
The Solvency II Directive is a European Union (EU) directive, which introduces risk-sensitive solvency requirements for insurance companies operating in Europe. The prime aim of the Directive is to regulate the amount of capital that EU insurance companies must hold to reduce the risk of insolvency. Insurers will be required to ensure that they have enough capital set aside to meet all insurance claims that they are likely to receive.
Delegated acts are legislative provisions made by the European Commission which supplement a Directive.
The Delegated Act adopted on Nov. 26, 2015 recognizes Bermuda’s prudential framework for insurance, reinsurance and group supervision as being fully equivalent to regulatory standards applied to European reinsurance companies and insurance groups in accordance with the requirements of the Solvency II Directive.
The Act, subject to a three-month review by the European Parliament and Council, grants full equivalence to the jurisdiction for an unlimited period, the Authority statement said. Official confirmation of Bermuda’s equivalence is expected in 2016, the Authority said, noting that this will be the culmination of a six-year effort by the Authority. Once the Delegated Act comes into force, the equivalence decision will be applied retroactively to Jan. 1, 2016.
Jeremy Cox, Chief Executive Officer of the Authority said: “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,” Cox continued, highlighting the fact that Bermuda has succeeded in becoming the world’s leading insurance -inked securities market and a premiere captive domicile, as well as a global reinsurance hub while “the Authority has ensured that these important markets are being supervised appropriately.”
The Authority statement noted, however, that Bermuda’s captives and Special Purpose Insurers (“SPIs”) remained out of scope of the Solvency II equivalence assessment.
In a separate media statement, insurance associations from the European Union, the U.K., and Bermuda have praised the EC’s action to find Bermuda and the Bermuda Monetary Authority (BMA) as fully equivalent for all regulatory purposes under the Solvency II regulatory and supervisory system.
Bradley Kading, President and Executive Director of the Association of Bermuda Insurers and Reinsurers said, “Solvency II 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,” he said, noting that Bermuda companies provided 20 percent of the recent U.K. Pool Re terrorism reinsurance placement and have historically supplied 20 percent of the European property-catastrophe reinsurance market.
Recent European airline and ocean marine cat losses were also partially absorbed by Bermuda insurers, which covered between 20 percent and 50 percent of losses for those events.
Other statements were offered by the Federation of European Risk Management Associations (FERMA), the International Underwriting Association (IUA), the Association of British Insurers (ABI), and the Bermuda International Long Term Insurers and Reinsurers Association (BILTIR).
FERMA President Jo Willaert, for example, 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.”
IUA CEO David Matcham noted that the Bermuda reinsurance market is an important source of diversification in reinsurance capacity for the international insurance market and for European insurers.
The Delegated Act covers full equivalence for Bermuda reinsurers licensed as Class 3A, 3B, 4, Class C, Class D and Class E (re)insurers and Bermuda insurance groups. Consequently, Bermuda shall be considered by all European Member States as applying an equivalent statutory insurance regime in accordance with the requirements of the three Solvency II Articles: Article 172, equivalence of reinsurance, Article 227, group solvency calculation and Article 260, equivalence of group supervision.
Sources: Bermuda Monetary Authority,Association of Bermuda Insurers and Reinsurers