Captives won't have to meet Solvency II standards

WEDNESDAY, JAN 30: Solvency II will not be applied to Bermuda captives.

That was reiterated by Jeremy Cox, CEO of the Bermuda Monetary Authority, as BMA laid out its business plan for 2013.

Mr Cox said: “You’re going to see the Bermuda Monetary Authority participate a little more aggressively than it has in the past. Certainly, we want to make sure our Government is able to achieve some of the aggressive things it is trying to achieve in job creation and business development.

“We have a unique time right now and we have to take full advantage of that.”

“The Bermuda Monetary Authority is going to be a facilitator of new business development.

He said Europe would once again delay Solvency II. (The Solvency II Directive is an EU Directive that primarily is concerned the amount of capital that EU insurance companies must hold to reduce the risk of insolvency).

“We at the Authority recognize that the goalposts will continue to change on the EU front, they are focused on so many other things. For us in Bermuda if we are going to lineup everything that we’re doing and it must be introduced at the pace that is consistent that’s going on in Europe and other jurisdictions, I think we would be making a major mistake. What we need to be doing is having our own independent views on what needs to be done for our Bermuda market.

“We are strong enough, we are credible enough, we are skilled enough as a jurisdiction and as a regulator to make our own independent views on how we should be positioned for the supervisory framework and the regulatory framework here in Bermuda.”

He was emphatic in stating that a Solvency II like framework would not apply to the captive segment of the Bermuda market.

“We will not be implementing a Solvency II like framework in Bermuda for the captive segment. Quite honestly, we’re not introducing a Solvency II like framework for any segment. That’s what I tell my staff. What we’re doing on the commercial side is what we think we need to do to facilitate good supervision. It has nothing really to do with Solvency II. What we had hope to achieve is that we would achieve equivalence in that.

“What we will be doing on the captive side is introducing a risk return as part of consolidated annual filing for captives that they will submit electronically, which will create efficiencies in the process for both the market and the Authority. 

Refinements

“That is the extent of our refinements. It’s good for Bermuda and the market that we can make this decision based on the proven appropriateness of our regime for captives. This step, as well as the changes to our framework for the commercial sector, reflects our ability to take independent decisions on regulatory change at a pace that’s right for Bermuda and according to what makes sense for our diverse market, while taking into account achieving global recognition for our supervisory regimes.”

Mr Cox said the Cooperate Service Provider Regime this is something that industry have been looking to see the Authority and Government get involved for a number of years.

“Under the CSP regime the Authority will license and supervise professional service providers in Bermuda  that act as agents for forming corporate entities, as well as providing other corporate services. This addresses an opportunity that industry identified some time ago for building new business in this area, while establishing appropriate oversight.”

The Authority will also be focused on the hedge fund area, participating in the on going jurisdictional effort to position Bermuda as a domicile of choice for asset managers.

Aggressively

“Based on my own interactions with stakeholders in key markets overseas regarding hedge funds, Bermuda has the opportunity to raise its profile further and compete more aggressively in this area,” he said. “The Authority is also engaged as a priority with local industry participants and the Bermuda Government on developing Bermuda’s position regarding Europe’s Alternative Investment Fund Managers Directive. It’s appropriate for the Authority to be part of such jurisdictional efforts to facilitate quality new business for Bermuda while ensuring we achieve regulatory objectives appropriately, in a manner that is workable for all parties.”