HAMILTON, Bermuda—Confidence is high in Bermuda that the domicile will gain third-country equivalence with the Solvency II risk-based capital regulatory regime being drafted in Europe.

Bermuda is among the first wave of countries, along with Japan and Switzerland, that are being considered for third-country equivalence status, meaning its regulations have been accepted as comparable to the upcoming European rules.

Officials from the Frankfurt, Germany-based European Insurance and Occupational Pensions Authority visited Bermuda in May to make an on-the-ground assessment of the domicile's progress toward a new regulatory regime.

Initial feedback from that visit is expected by the end of this month, experts say.

The drive for Solvency II equivalence is part of a wider priority of ensuring that the wide array of insurance entities on the island—which include global reinsurers and captives—are subject to a pragmatic regulatory framework, said Jeremy Cox, CEO of the Bermuda Monetary Authority.

The BMA seeks to align its efforts with those of the International Assn. of Insurance Supervisors, which aims to level the playing field of international regulation and facilitate regulatory equivalence, he said.

“We see the importance of our framework being regarded as equivalent by other major jurisdictions that are relevant to our market,” said Mr. Cox. “Such equivalence can provide, among other benefits, increased opportunities for Bermuda firms to operate in key markets under nondiscriminatory terms and less duplicative regulation.”

Because of the “significant amount of commercial reinsurance business conducted between Bermuda and Europe, Solvency II is highly relevant to this market,” said Mr. Cox.

Bermudian insurers and reinsurers are well-prepared for a risk-based capital regulatory regime, sources say.

Bermuda has been incorporating enhanced risk-based capital requirements into its regulatory framework since 2007, according to Mr. Cox.

In 2007, the BMA began a trial of the Bermuda Solvency Capital Requirement with large insurers, and in 2008 that requirement was implemented for large—Class 4—companies in Bermuda.

Class 3B companies, those whose total net premiums from unrelated business total $50 million or more, also now are subject to the BSCR, and the model is being rolled out for the rest of the commercial insurance market.

Many Bermudian insurers have European operations, which has helped drive the island's preparedness, said Mr. Cox.

Bermudian insurers and reinsurers are well-advanced in their preparations for a new regulatory regime, according to Charles Dupplin, CEO of Hamilton, Bermuda-based Hiscox Bermuda, a unit of Hiscox Ltd.

And the BMA has recruited some good regulators in recent months to help the island's efforts, he said.

This bolsters the regulator's credibility, said Arthur Wightman, a partner at PricewaterhouseCoopers L.L.P. in Bermuda.

“I would be extremely surprised if there were any problems on the technical side,” said Mr. Dupplin. He said there is a mood of “cautious optimism” about EIOPA's feedback.

Companies in the market are well-prepared to begin operating under a new risk-based capital regime, experts say.

Companies in Bermuda have been “technically underwriting and using models”—an important facet of Solvency II—for longer than many of their European counterparts, said Mr. Wightman.

“On the whole, Bermudian insurers and reinsurers appear well-equipped to move to a risk-based capital regulatory model,” said Brian Schneider, a director in the insurance team of Fitch Ratings Inc. in Chicago. “The majority of these companies have already developed sophisticated economic capital models.”

Success of the equivalence drive is very important for insurance and reinsurance buyers across the world who rely on a solid, well-regulated insurance market in Bermuda, said Mr. Dupplin.

Well-run insurers and reinsurers will welcome the level playing field that the new regulatory system should put in place and the fact that it should help to prevent the collapse of insurers and reinsurers, Mr. Dupplin said. The costs of a company collapse often are partly borne by other players in the market, he said.

And it is important for Bermudian companies that equivalence is granted, said Mr. Schneider.

“Solvency II does not allow European insurers to count reinsurance support towards their regulatory capital unless it is provided by reinsurers operating under a comparably rigorous regime,” he said. “If Bermuda failed to gain third-country equivalence, it would place Bermudian reinsurers at a huge competitive disadvantage with respect to attracting European clients, at a time when demand for reinsurance from European primary companies is expected to surge,” he said.

Companies and regulators in Bermuda are taking the Solvency II equivalence project very seriously, according to PwC's Mr. Wightman.

“They are very focused on ensuring that a focus on quality regulation is preserved,” he said, “but are taking the view that equivalence doesn't mean equal.”

Bermuda's regulators want to ensure that the rules are proportionate and risk-focused.

Therefore, he said, Bermuda's regulations eventually may place less of an administrative burden on companies as the way that national regulators interpret the European Solvency II rules.

“We intend to maintain a risk-based, proportionate approach to regulation for firms in our market, to ensure Bermuda correctly balances workable supervisory regimes with international expectations,” Mr. Cox said of the BMA.

“In our view, consistency with international standards means broad equivalence, not line-by-line duplication of requirements,” he said. “To simply copy standards wholesale from elsewhere would not be appropriate. This perspective is consistent with EIOPA's position regarding their Solvency II assessments, which states that while all applicable criteria under the directive need to be met for a positive equivalence assessment, a positive assessment does not require that every indicator be fulfilled,” he said.

Potential delays to the start of the regime in the European Union likely will not hold up progress in Bermuda, Mr. Wightman said.