Solvency II Equivalence FAQs

By Bermuda Monetary Authority · 2016 · CP341-115-25

Study guide: Exam CP-341

A four-page April 2016 question-and-answer sheet from the Bermuda Monetary Authority on Solvency II and on what its equivalence means for Bermuda. It explains what Solvency II is and why it came about, what third-country equivalence means, which Bermuda insurers are affected, and how the Authority responded to the process of obtaining equivalence.

On the syllabus

• Exam CP-341 — Outcomes 3e; the whole document.

What is Solvency II?

• The Solvency II Directive is a harmonised framework aimed at ensuring there is a single market, using a single set of rules for insurance services, and its requirements apply to (re)insurance companies and EU insurance groups operating in the EU.
• It encompasses requirements surrounding risk sensitive solvency, governance and risk management, and public disclosures.

How and why did Solvency II come about?

• It is an EU directive adopted in 2009 that replaced the 14 insurance and reinsurance directives previously known as Solvency I, and its overall objective is to protect (re)insurers' policyholders and provide for a stable financial system.

What does Solvency II equivalence mean?

• Equivalence for third countries means a non-EU jurisdiction has an insurance regulatory regime that achieves the same outcomes as those determined under the Solvency II framework; EIOPA is responsible for the technical assessment and the European Commission for the equivalence decision.
• It enables (re)insurers and insurance groups from third countries to conduct business in the EU as though they were EU-domiciled.

What does Solvency II equivalence mean for Bermuda?

Has Bermuda reached Solvency II equivalence?

Are there any other non-EU countries who have reached Solvency II equivalence?

What is the Authority's involvement in obtaining Solvency II equivalence?

Which Bermuda insurers are impacted by Solvency II equivalence?

Are Bermuda's captives affected by Solvency II equivalence?

• Bermuda's captives or limited purpose insurers and Special Purpose Insurers are not impacted by Solvency II equivalence.

Why has it taken Bermuda so long to achieve Solvency II equivalence?

What were some of the challenges Bermuda faced on the road to achieving equivalence?

Equivalence has raised the bar for Bermuda's (re)insurance industry; how will the Authority respond to expectations in a post-equivalent era?

What's next for Bermuda?

Sources

• Solvency II Equivalence FAQs (Bermuda Monetary Authority, April 2016) — the document: title, date and the question headings, and the text of the answers on what Solvency II is, how it came about, what equivalence means and the captives answer; the SOA's copy of the study note is not published, so the identification of "CP341-115-25: Solvency II Equivalence FAQs" with this document is by title
• CP 341 Syllabus, Mar 2027/Jul 2027 (SOA) — the citation as study note CP341-115-25 and the learning outcome it is assigned to