Financial regulator the Bermuda Monetary Authority yesterday took another step toward achieving regulatory equivalence with new European Union solvency rules for insurers.

The BMA announced the release of two consultation papers — one on self-assessment of solvency and the other on disclosure and transparency.

These are two of the areas addressed by the EU's imminent Solvency II rules, likely to take effect in 2013, which aim to improve corporate governance, strengthen capital requirements and raise the level of protection for policyholders.

The news came the day after Bermuda was named with Switzerland as one of two non-EU countries in line to be assessed for Solvency II equivalence within the next year. The United States was one of those to miss out on the first wave, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) announced on Wednesday.

Achieving equivalence is of great importance to Bermuda's global re/insurers, as it will help to ensure that they will not be competitively disadvantaged in the European marketplace after the new rules are introduced.

The BMA's latest consultation papers are entitled "Commercial Insurer's Solvency Self Assessment" (CISSA) and "Disclosure and Transparency". They outline the regulator's proposal for a regime similar to that of Solvency II's Own Risk and Solvency Assessment (ORSA) and enhancement of disclosure requirements for the Island's commercial insurers.

BMA chief executive officer Jeremy Cox said: "Achieving regulatory equivalence for our insurance framework with major international markets has been a strategic priority for the Authority for some time now.

"We have set our sights on obtaining broad equivalence for our commercial insurance framework under Solvency II, and we continue to make significant progress in this regard.

"Our latest developments cover two key priorities from a global regulatory perspective – the quality of risk and solvency assessments in the market and ensuring firms make appropriate disclosures. Starting consultation on these key elements of our proposed enhanced framework clearly demonstrates the progress we are making towards equivalency."

The Authority has also issued for industry feedback the draft "Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirements) Amendment Order 2010". The order details the additional disclosure requirements that will come into effect for Class 4 and Class 3 re/insurers as of December 31, 2010.

With regard to the CISSA regime, the Authority is proposing a trial run for Class 4, Class 3B and Class 3A insurers at year-end 2010, with full implementation set for the 2011 reporting year-end.

Craig Swan, director, policy, research and risk assessment, said: "The Authority appreciates that international debates on financial regulation are on going and that standards are evolving, particularly in the area of disclosure and transparency.

"Therefore implementing our disclosures regime in phases will afford us the opportunity to keep step with these evolving standards, while allowing us the time to decide upon the most appropriate application of issues being considered by the international bodies."

Both consultation papers are available on the Authority's website: www.bma.bm.