Spring 2016 14 Bermuda:Re/insurance+ILS “As we face larger and larger exposures and bigger/ potentially more damaging natural or manmade events, it’s important to spread that risk.” Francois Morin, Arch Capital “It would have made it harder for them to trade with Bermuda reinsurers and counterparties. All it does really is make Bermuda a relevant place to do business with for European companies and ensure a bigger capital base to supply the coverage that we’re all trying to provide around the world.” Morin adds that in light of the increasing amount of natural disasters, there is value in having, using and getting access to the insurance marketplace globally to diversify and spread the risk. “As we face larger and larger exposures and bigger/potentially more damaging natural or manmade events, it’s important to spread that risk and use the entire capital base that’s available in the market,” he says. It is worth considering the consequences had equivalence not been awarded. Hindson admits it would have represented a “fairly significant challenge” for Bermuda if the status had not been awarded. “I don’t think it would have had an overnight affect, but it would have certainly been unhelpful,” he says. Ouma is more positive but admits that costs could have increased. “Both sectors would certainly have survived. Bermuda has a robust market, it’s a leading jurisdiction. The cost would have just been a little bit higher, it would have been more cumbersome, but I don’t think it would have meant the end of commercial business,” he says. This isn’t an issue, however, and Bermuda’s insurance and reinsurance companies can relax in the knowledge that they can still operate in the EU market with no restrictions. Morin concludes: “The bottom line is that given Solvency II was going to happen in Europe, equivalence is a good thing for everybody—for Bermudian companies and for companies in Europe, but also those around the world. The more uniformity we can have around regulation the better.” to comply with different regulatory regimes in different parts of the world. He hopes equivalence will save the duplication of work. “There is potential for less of a regulatory burden for companies that have a footprint in Europe and in Bermuda,” Hindson says. “At the moment, we have to do quite a lot of regulatory filings and report to the Bermuda Monetary Authority under one format and to carry out various European regulations under another format. “There may be some hope for more consistency under Solvency II. More in hope than expectation, but there has been a huge investment in Solvency II for companies that have a European footprint.” Morin at Arch agrees. “Solvency II equivalence is good in a sense that it eliminates that potential second level of regulation having to deal with Bermudian and European regulators.” Two-way street It is not just one way in terms of the benefits of equivalence. Many experts believe Europe will also benefit from the decision to give Bermuda equivalence. Michael Butler, senior partner at Moore Stephens, notes that if Bermuda didn’t have Solvency II equivalence, it would have been more expensive for EU companies to place reinsurance business in Bermuda. “Bermuda is an important reinsurance market for European insurers as it’s one of the biggest global players,” he says. “Bermuda’s equivalence allows EU insurers the opportunity to do business with a jurisdiction which has a reputation for being flexible.” Morin agrees, adding: “The insurance marketplace is more and more a global marketplace so to have to get over these regulatory hurdles with no equivalence would have been an issue for European companies.
Bermuda:Re+ILS Spring 2016
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