The Bermuda Monetary Authority announced today what it calledsignificant changes for Bermuda's solvency and disclosureregulations for insurers.

It said the revisions will help ensure Bermuda achievesrecognition as having regulatory standards equivalent to those inEurope's Solvency II Directive.

The Authority also announced new measures to facilitate specialpurpose vehicles (SPVs).

“I'm pleased to say that the developments announced today meanwe're well on track to achieving our objective of achievingequivalence, or mutual recognition status, in Europe andelsewhere,” said Matthew Elderfield, chief executive officer of theAuthority.

“Bermuda is now one of the countries at the front of the pack interms of preparing for Solvency II,” he commented.

With the recent passage of the Insurance Amendment Act 2008, theAuthority said it will now introduce, among other new and expandedregulatory initiatives, the Bermuda Solvency Capital Requirement(BSCR), an enhanced solvency regime that will apply to Bermuda'sClass 4 (re)insurers, its largest insurance companies.

“The BSCR will assist us to build on Bermuda's existing solvencyregime by establishing risk-based capital adequacy standards forhigh impact insurers,” Mr. Elderfield said.

“This will allow for a more risk-sensitive approach to settingsolvency requirements for Bermuda's insurers, in line withinternational developments regarding capital adequacy such asSolvency II,” he added.

“Implementing the BSCR will also help with the Authority'stransition to recognizing companies' internal economic capitalmodels,” said Mr. Elderfield.

“Permitting the use of internal models for our (re)insurancecompanies to determine appropriate capital levels for theirbusiness, subject to review and approval of each model by theAuthority, is again consistent with developments in internationalinsurance regulation,” he noted.

Other initiatives facilitated by the new provisions in theamended legislation include the publication of financial statementssubmitted to the Authority by Class 4 companies, under newreporting requirements for these high impact insurers, usingGenerally Accepted Accounting Principles (GAAP).

“These new provisions enable us to publish GAAP financialstatements, which will result in enhanced standards for disclosurefor Bermuda's Class 4 insurers, in line with internationalstandards relating to transparency in the industry,” Mr. Elderfieldsaid.

The legislation also facilitates the re-classification ofBermuda's Class 3 insurance sector, which includes a large numberof firms with a wide range of characteristics–from captive insurerswriting a limited amount of third-party business to large, purelycommercial (re)insurers.

“This means we're establishing further subcategories within theClass 3 group, based on their respective risk profiles,” Mr.Elderfield explained.

He said, “We will be able to refine our application ofrisk-based supervision to these firms further, to ensure theyreceive the level of oversight that is appropriate to the nature oftheir business.”

The reclassification, Mr. Elderfield noted, also introduces anew category of 'Special Purpose Insurer,” focused on fullycollateralized SPVs that are established to conduct specificinsurance transactions (most typically asset-backed securitizationtransactions).

The new classification, it was explained, will make it lesscostly for SPVs to be established in Bermuda.

“The changes agreed for SPVs will help maintain Bermuda'sposition as a leading insurance market,” Mr. Elderfield said.