Transcript The Bermuda Market in 2005

Insurance Regulation – Where Is It
Going?
Wednesday 24th June 2009
Insurance Regulation – Where Is It Going?
• Panel speakers
Charles Collis, (Moderator)
Partner
Conyers, Dill & Pearman
Shelby Weldon,
Director, Insurance Licensing & Authorisation
Bermuda Monetary Authority
Richard Lightowler
Partner
KPMG Bermuda
Guy Soussan
Partner
Steptoe & Johnson – Paris and Brussels
Insurance Regulation in Bermuda
• Bermuda Monetary Authority applies a risk-based approach
to regulation
• Ensures supervisory resources used efficiently and
effectively, while placing appropriate amount of regulation on
companies
• Authority is committed to international regulatory standards,
but ensures that Bermuda regulation remains practical for
market as well as effective
• Most recent Bermuda regulatory enhancements focused on
commercial sector, e.g. Bermuda Solvency Capital
Requirement
–
In line with risk-based approach and goals re: mutual
recognition (regulatory equivalence) for Bermuda internationally
Bermuda Framework Enhancements and
Captives
•
Insurance Manager On-site Programme
- Provides efficient means of supervising captive market via
evaluation of captive manager compliance/effectiveness re:
corporate governance and internal controls
- In line with international standards of risk assessment and
management
•
Class 3 Reclassification initiative
- Segregation of Class 3 sector based on percentage of
unrelated business and NPW; created new Special Purpose
Insurer class
- Supports effectiveness and further refines application and
consistency of risk-based supervision of commercial
insurers (Class 3A, Class 3B, Class 4), while maintaining
appropriate oversight of captives
- Class 3: captives writing >20% but <50% unrelated
business NPW
•
Overall, changes firmly focused on higher risk commercial
market - captive regime remains largely unchanged
Active Monitoring of International
Regulatory Trends – Impact on Captives
• IAIS Captives Guidance Paper
- Authority was a member of the IAIS Captive Guidance
Paper Drafting sub-group, helped to finalise the IAIS
Guidance Paper on the Regulation and Supervision of
Captive Insurers
- Bermuda’s regulation will remain broadly unchanged and
not affected by this Guidance Paper
• Solvency II Directive
- Current proposal: captives writing <€5 million GPW to be
within scope
- Bermuda recommending that focus remain on
commercial sector
- Outcome remains to be seen; will seek to ensure that
proportionality principles will apply in eventual Bermuda
response
Looking ahead
•
Authority considers regime for Bermuda captives to be appropriate for
risks inherent to sector
- Propose eventual analysis of existing captive regime to
benchmark against current and developing international practices when
they are clearer
•
Will continue to actively monitor developing international standards that
may impact captives
- Goal is to be in position to proactively manage scope and nature
of any changes that may be required
•
Focus for regulatory changes to remain on commercial (re)insurers – in
line with global trends
- Group supervision
- Internal models
- Market transparency: public filings, risk disclosure
- Limited impact on Class 3 captives
•
Committed to maintaining right balance for Bermuda, and proportionality
in applying regulation of captives
Solvency II on the Horizon
Impact on EU and Bermuda-domiciled Captives
Bermuda Captive Conference
June 21-24, 2009
***************
Guy Soussan
Avocat (Paris and Brussels)
Solvency II and EU-Domiciled Captives
• General framework applies to all EU (re)insurers,
including captives
– Two levels of capital requirements
– Risk management
– Supervisory reporting and disclosure
• Unless annual premium income is less than EUR
5 million
The Need to Address Captives Specificity
• Lower capital requirements and operational costs
• Applying the principle of proportionality to captives
• Technical measures reflecting specificity needed
before 2012
Solvency II Impact on Bermuda Captives
Bermuda captives covering EU risks
– Not a Solvency II issue, BUT
– Market access subject to individual Member
States' approval
– Setting up a separate EU captive to cover EU
risks?
Solvency II Impact on Bermuda Captives
Bermuda captives covering EU domiciled cedants
– Issue impacted by Solvency II
– Cross border reinsurance generally allowed in
all Member States
– But conditions for reinsurance vary between
Member States
Gaining Equal Access to EU Market
• Subject to recognition process by the EU
• Bermuda supervisory and solvency standards for
reinsurance must be deemed equivalent to
Solvency II standards
• Bermuda is actively working toward this
recognition