Representatives from Guernsey Finance, the promotional agency for the island’s finance industry, have argued that common misunderstandings about Solvency II regulations have constrained the development of the reinsurance sector in the island.
Speaking at Guernsey Finance’s ILS Insight event in Zurich, experts clarified that Guernsey reinsurance is still available to EU-domiciled insurers and allows them to take credit in capital calculations for reinsurance under new the regulations.
Jason Noronha, Head of Actuarial and Analytics at Aon, who heads the firm’s non-life insurance actuarial consulting team, noted that there was “still a lot of confusion in the market.”
He stated that credit would be granted for reinsurance in firms’ capital calculation for European-domiciled insurers who have bought from a non-equivalent, such as Guernsey, if the entity is rated triple-B or above or collateralised.
“If a reinsurance contract is fully collateralised, as long as the requirements are met, you can take full credit,” he said.
“There is no reason why an EU-domiciled insurance company should not be able to benefit from reinsurance from a non-equivalent domicile – that is, one operating in Guernsey,” Noronha explained. “There is no reason why the benefit of that reinsurance should not be recognised under the Solvency II capital calculation.”
He added: “Solvency II is complex and open to interpretation, so some views won’t agree – but there is no real restriction on the use of non-equivalent domiciled reinsurance, as long as there is some mitigation in place, such as a credit rating or collateral.”
Dominic Wheatley, Chief Executive of Guernsey Finance, also commented: “This is welcome confirmation of the island’s position with regards to Solvency II and reinsurance.”
“Guernsey’s diverse insurance industry provides a flexible, responsive regulatory regime outside of the EU, which is quicker, less prescriptive and more flexible than Solvency II,” Wheatley continued. “We distinguish between different classes of insurer and place proportionate regulatory burdens on each.”
