Bermuda on track to comply with EU insurer rules

By added on 27/06/2012

Bermuda is on course to bring capital rules for insurers into line with the European Union's tough new Solvency II regime, the island's financial regulator said, reports Reuters.

"It is clear that we are on the right track," Bermuda Monetary Authority chief executive Jeremy Cox said following a round of talks on Solvency II between the BMA and the European Commission.

"I came away from the meetings with a renewed level of confidence."

Bermuda, home to hundreds of reinsurers attracted by a favourable tax regime, wants the EU to recognise its capital regime as equivalent to Solvency II otherwise it might lose business from European insurers.

If Bermuda's regime does not win equivalent status, European insurers would not, under Solvency II, be able to count the full value of Bermudan reinsurance contracts towards their capital.

Bermuda-based reinsurers, which include Catlin, Endurance, Hiscox, Montpelier Re and Validus, account for about 40 per cent of the European property catastrophe reinsurance market, according to EU insurance regulator EIOPA.

In a preliminary assessment last October, EIOPA said Bermuda's regulatory regime for big insurers mostly complied with Solvency II.

Solvency II, 10 years in the making, is designed to make European insurers hold capital reserves in strict proportion to the risks they underwrite.

The rules, due to come into force in 2014, were expected to lead to higher capital requirements for many insurers.

Under draft proposals currently being discussed by EU officials and lawmakers, non-EU countries would be given six years to bring their regimes into line, although some European insurers want this extended to 10 years.

European insurers fear they could be forced to hold extra capital against units in the United States, making them uncompetitive, if the EU does not recognise the US insurance regime as being on a par with Solvency II.

Prudential, Britain's biggest insurer and owner of Jackson National Life in the United States, said in February it might sidestep the new rules by relocating outside the EU.