On 26 November 2015 the Commission adopted equivalence decisions concerning Bermuda and Japan. The new Delegated Acts will enter into force on 1st January 2016 and will be applied retroactively following the “objection period” by the Parliament and Council.
Bermuda has been granted full equivalence, for all the three equivalence articles. However the decision excludes some captives and special purpose insurers.
This decision amends the Commission’s decision from June 2015.
Bermuda has substantially reformed its insurance regulation in the past years, working in close contact with EIOPA. In July the Bermuda Regulatory Authority (BMA) introduced the Insurance Amendment (No 2) Act 2015. According to the Delegated Act on Bermudan equivalence, this new insurance legislation introduces a solvency regime deemed to be equivalent to that under Solvency II.
The equivalence decision takes into account additional criteria to the solvency regime, which include the powers of the national insurance authority, governance, transparency, professional secrecy, cooperation and exchange of information.
The Commission stated in the Delegated Act that it would monitor Bermuda’s insurance and reinsurance market to verify its on-going compliance with the Solvency II equivalence conditions.
Japan has been granted temporary equivalence for five years in respect of Article 172 (reinsurance) and provisional equivalence for ten year in respect of Article 227 (group supervision).
Temporary and provisional equivalence have a limited application and duration, and can be determined when a third country is making progress towards full equivalence.
Temporary equivalence can be recognised for reinsurance (Article 172.4) and third country groups operating in the EEA (Article 260.5) for five years, with a possible one-year extension.
Provisional equivalence can be granted only for group solvency calculation (Article 227.5) for ten years, with a possible renewable for a further ten years. Full equivalence is granted indefinitely.
Japanese insurers and the reinsurers will now be subject to a number of requirements such as extensive annual and semi-annual reporting to the national regulatory authority, annual future cash flow analysis and improved risk management practices.
According to the Delegated Act, “The Commission will continue to monitor, with the technical assistance of EIOPA, the evolution of the regulatory regime for insurance and reinsurance in force in Japan and the fulfilment of the conditions on the basis of which the provisional equivalence Decision and the temporary equivalence Decision have been adopted.”
Decisions regarding Solvency II equivalence with the US are still pending negotiation. Significant progress was made recently as now both sides have permission to begin negotiations on the Covered Agreement for reinsurance collateral (Solvency II Wire 21/11/2015).
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