Bermuda Pushes For Solvency II Equivalence
by Jason Gorringe, Lowtax.net, London
10 June, 2015
The Bermuda Monetary Authority (BMA) has reported that Bermuda has been recommended for "provisional equivalence" with Europe's Solvency II Directive and will now be subject to a review by the European Parliament and Council.
Through the Solvency II regime, regulators hope to establish a harmonized, sound, and robust prudential framework for insurance firms in the EU. It is based on the risk profile of each individual insurance company in order to promote comparability, transparency, and competitiveness.
The new regime is intended to tackle shortcomings under Solvency I, to establish a more accurate picture of an insurer's risk; to ensure accurate and timely intervention by supervisors; and ensure an optimal allocation of capital (that is, an allocation which is efficient in terms of risk and return for shareholders).
The granting of equivalence is expected to greatly reduce the compliance burden on cross-border insurance business, significantly increasing Bermuda's competitiveness in the EU.
Following "provisional equivalence" Bermuda will seek to reach the status of "full equivalence."
Jeremy Cox, BMA CEO, said: "This is good for Bermuda, but it is not the complete and final result we seek. The Authority has an unreserved commitment to achieving full equivalence with Solvency II. It is essentially a timing issue. The European Commission included Bermuda on this new provisional list of countries before the deadline for Bermuda's submission on measures to be implemented for full equivalence."
"Our submission for full equivalence is being reviewed as we speak and we anticipate a decision sometime between Q3 2015 and Q1 2016. The bar is very high for non-European jurisdictions yet we firmly believe that a pathway to full equivalence exists for Bermuda. Executives of the Authority met with members of the European Commission in Brussels just last week, and discussions were favorable. By the end of this month, we will have all remaining measures in place. Full equivalence will help expand the global market for risk transfer products and in turn widen the choice of capacity for the buyers of these programs."
The insurance regimes of Australia, Brazil, Canada, Mexico, and the United States have also been recommended for "provisional" equivalence with Europe's Solvency II Directive.
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