European Insurance Watchdog Backs Bermuda
European insurance watchdog EIOPA has said Bermuda’s regulatory regime for big insurers mostly complies with the European Union’s own strict Solvency II rules, Reuter is reporting, easing fears of a mismatch that could have hindered Bermudian players’ access to the European market.
“EIOPA’s advice is that Bermuda meets the criteria set out in EIOPA’s methodology for equivalent assessments under Solvency II,” EIOPA said on Wednesday [Oct. 26] in a submission to the European Commission.
The European Insurance and Occupational Pensions Authority is a European Union financial regulatory institution that replaced the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). It is established under European Union regulations.
Last week EIOPA, one of three European supervisory authorities, released a preliminary report detailing how Bermuda stands to reach Solvency II equivalency.
“We feel quite good about the report as it stands today,” Jeremy Cox [pictured], chief executive officer of the Bermuda Monetary Authority, said. “Effectively, what they said is Bermuda, for its commercial insurance sector, is equivalent, with some caveats.
“We have reviewed those caveats and I don’t think there are many things there that we would feel uncomfortable further evolving our position on,” Mr. Cox added. “We should be in a very good position for a formal decision on equivalency by the end of next year.”
Achieving equivalency with Solvency II, the new regulatory scheme being rolled out in the European Union, is important for Bermuda’s continued high standing as a re/insurance domicile, Mr. Cox said.
If Bermuda’s regime had failed to win EIOPA’s approval, European insurers would have been unable to count the full value of Bermudian reinsurance contracts towards their capital, potentially deterring them from doing business on the island.
Bermuda, a major centre for the global reinsurance industry thanks to its favourable tax regime, is home to reinsurers who account for 40 percent of the European property catastrophe reinsurance market, EIOPA said.
Bermuda-based insurers include Montpelier Re , Hiscox , Catlin , Validus and Endurance .
EIOPA also said Switzerland — a non-EU member — and Japan’s regulatory regimes mostly complied with Solvency II, a set of rules aimed at bolstering European insurers’ capital expected to come into force in 2014.
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- Best: Equivalency Will Boost Bermuda Firms — Clearing and Settlement | November 12, 2011
Thats whats up!……For real/Mmmm seems like the hard behind the scenes work is paying off.In all honesty…I am glad that there is still a stand for bermuda/even if its silent and ever hard working,when you see information like this and you take time out to analyze it and see where it fits in with your life its amazing to know that there are qualified people doing a great job to ensure stability for the whole of Bermuda,Keep it up!
It is not over.
Scary parts of the EIOPA assessment:
49. EIOPA cannot positively conclude on the current valuation framework, given the variety of different valuation standards available, or on the proposed valuation standards, given the material uncertainties which remain around the economic balance sheet framework being developed.
Furthermore the lower capital requirement is not risk based and in practice can be very low for reinsurers with a high risk profile. For some risks, including currency, concentration and counterparty risks, the higher capital requirement lacks risk
sensitivity compared to the SCR.
56. We find the BMA not equivalent with regard to its requirements around changes
in business, management and qualifying holdings under Principle 11. Although
the Insurance Act (IA) requires that insurers’ shareholder controllers be
assessed, neither the IA nor any other law requires insurers to provide the BMA
with details of changes to their scheme of operation. Therefore only few critical
changes in business, including engaging in non insurance business, require BMA
approval.
To be equivalent, legally binding criteria would need to be developed to
achieve a clear set of business change situations which require BMA approval
rather than relying on internal and unpublished supervisory practice. In addition,
there is significant outsourcing in Bermuda, in particular for captives. For
equivalence the legally binding requirements around the notification process for
the outsourcing of key functions would need to be expanded. Furthermore,
publicly available guidance would also need to be introduced regarding the
documents and information required for an appropriate shareholder controller
assessment.