Swiss Rules Tougher Than Solvency II

January 31, 2011

switzerlandSwitzerland is continuing efforts to blunt the island’s competitive edge as the leading catastrophe re/insurance domicile by rolling out new regulatations even more stringent than the European Union’s Solvency II rules  the Bermuda Monetary Authority is working to gain equivalence with.

Bloomberg reports today [Jan. 31] the new solvency regulations for Swiss insurance companies are tougher than the Solvency II rules which take effect in 2013.

The new Swiss risk-based solvency rules, which were introduced on January 1, require insurers to provide a mark-to-market valuation of assets and liabilities that for the first time takes into account their investment portfolios.

Like Bermuda, Switzerland — not an EU member — hopes to earn mutual recognition with Solvency II, which aims to align insurers’ risks with capital to offer greater protection to policyholders.

The BMA has been working to achieve regulatory equivalence with the European Union’s Solvency II standards in recent years. Equivalence would not only assist Bermuda companies to conduct business in Europe on a much more efficient basis, it would also help Bermuda-based re/insurers avoid duplication of regulatory oversight.

“Our goal is to achieve broad equivalence by 2012,” the BMA’s Shelby Weldon said at a panel discussion on Solvency II equivalence last year. “It’s not our intention to duplicate the Solvency II criteria line by line. The foundation of Bermuda’s efforts is a risk-based approach, but with an eye to the nature of the Bermuda market that includes captive insurers and global reinsurance companies, he said.

“We have been very hard at work over the last two years enhancing our regime,” Mr. Weldon said. “A lot of that work was geared to our commercial sector.”

The two key principles of Solvency II—policyholder protection and improving the quality of insurance regulation worldwide—have long been included in Bermuda’s regulatory legislation, Mr. Weldon said at the time, adding the island’s existing regulatory regime is entirely consistent with international standards.

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