Bermuda is sparing no effort in its race for “regulatory equivalence”, as Brad Kading explains.
In 2007, the 22 companies of the Association of Bermuda Insurers and Reinsurers wrote global gross written premium of $59bn on a capital base of $73bn.
That accounted for about 25% of the US reinsurance market and about 27% of broker-placed European reinsurance business. In certain market segments such as property catastrophe, the ABIR writes as much as 40% of US and European business.
The ABIR’s 22 members have grown and prospered in Bermuda for several reasons: 1) the speed to market offered by an efficient, informed regulator; 2) the fact that capital markets and insurance experts converge here to innovate new structures; 3) the special benefits of a centre of excellence; a cluster of risk transfer experts successfully synergising with the skills of each other – much like California’s Silicon Valley.
As Bermuda nears its 400th anniversary of settlement, it is determined to do what it takes to earn “regulatory equivalence” in the world’s markets including the EU and the US. Insurance buyers are familiar with the ABIR’s members, but are less aware of the changes in Bermuda’s solvency regulation.
Our regulator – the Bermuda Monetary Authority – has twice been assessed by the IMF and we expect another positive report on milestone solvency standards, which are designed to exceed the evolving international solvency regulation requirements.
But Bermuda is not stopping there, the BMA’s other developments are: a financial examination programme; a risk-based capital regime now in its second year; rules requiring disclosure of financial statements; a new legal authority in the use of models for required capital levels; stress and scenario testing; and the authority to require capital add-ons.
With consultations underway on future disclosure requirements and group supervision, Bermuda is on its way to creating the building blocks it needs for regulatory equivalence. In 2012, when Europe begins to assess other domiciles, Bermuda should be well placed to make its case as a solvency regulator. Bermuda’s achievement there will serve it well as the IAIS regulatory standards evolve into an international solvency assessment and the US moves towards a framework for cross-border reinsurance.
Bradley Kading is president & executive director of the Association of Bermuda Insurers and Reinsurers, ABIR.