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15th of May 2012

Bermuda offered ‘segmented equivalency’ by EC

Vicky Beckett 16/12/2011

Bermuda will not have to apply the most stringent aspects of Solvency II to be deemed equivalent, the European Commission has announced.
 
Karel Van Hulle, the European Commission’s head of unit for insurance and pensions, said ‘segmented equivalency’ was permitted.
 
Van Hulle made a presentation to the Bermuda Monetary Authority (BMA) Regulatory Forum that suggested Bermuda will earn equivalency by stating the Island is in the first league of countries in terms of insurance regulation.
 
This comes amid reports that jurisdictions could become Solvency II equivalent by agreeing to meet the directive’s standards by 2018.
 
Guernsey, the Isle of Man and Singapore have received letters from the European Commission encouraging them to support the directive.
 
The BMA has been working hard achieve equivalence to avoid Bermudian-domiciled companies being at a disadvantage when writing business in Europe.
 
However, concerns were raised that the directives tough capitalisation requirements and compliance costs could be off- putting to captives, and push them towards non-equivalent domiciles such as the Cayman Islands.
 
Jeremy Cox, CEO of BMA, said: “Mr Van Hulle said the question was made about whether they could give a bifurcated decision on equivalency and he found that they were able to do that.”
 
David Ezekiel, chairman of Marsh IAS, said Solvency II equivalence had the potential to adversely impact the captive sector, but it had not done so yet.
 
He argued an exception for class one, two and three captives made sense as they have a much lower risk profile than the large class 4 insurers of third-party risks.
 
Mr Ezekiel said he does not see the Bermuda loosing captives to the Caymans because of equivalence.
 
He said: “I don’t see that happening. For the large-scale captives, Bermuda is the domicile of choice, there is no doubt in my mind about that.
 
A final decision on Solvency II equivalence for Bermuda will be given 2013.

Tags: Bermuda, BMA, European Commission, Karel van hulle

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