Solvency II is the European Union’s regulatory regime for insurance and reinsurance undertakings, designed to ensure policyholder protection and financial stability. One of its important external features is the concept of “equivalence.” This allows insurers from third countries—those outside the European Economic Area (EEA)—to be treated similarly to their EEA counterparts under specific conditions. Equivalence is not only important for fostering international insurance business but also for reducing regulatory duplication and facilitating capital flows.
Equivalence under Solvency II can be granted in three distinct areas: reinsurance, group supervision, and group solvency. Each area is assessed separately, and a country can receive full, partial, or temporary equivalence for any of them. Equivalence decisions are made by the European Commission, often based on technical advice from the European Insurance and Occupational Pensions Authority (EIOPA).
For reinsurance, equivalence means that EEA reinsurers and reinsurers from an equivalent third country are treated equally with regard to collateral and regulatory recognition. For group supervision, equivalence permits EEA regulators to rely on third-country supervisory regimes when overseeing groups headquartered outside the EU. For group solvency, equivalence allows insurers in the EU to use local rules to calculate group capital requirements if the parent is in an equivalent jurisdiction.
Countries with some form of equivalence
Several countries have been granted equivalence under Solvency II, though the extent and permanence of the decisions vary. As of mid-2025, the following countries hold some form of equivalence:
Bermuda – Fully equivalent for reinsurance and group solvency
Switzerland – Fully equivalent in all three areas
Japan – Temporary equivalence for group solvency and group supervision
United States – Temporary equivalence for group supervision only
Australia – Temporary equivalence for group solvency
Brazil – Temporary equivalence for group solvency
Canada – Temporary equivalence for group solvency
Mexico – Temporary equivalence for group solvency
South Africa – Temporary equivalence for group solvency
Bermuda and Switzerland are the only countries to achieve full equivalence. Bermuda, for example, has a long-standing reinsurance market and its regulatory framework closely aligns with Solvency II. It was granted full equivalence in 2016, reflecting its high standards in both reinsurance and solvency oversight. Switzerland, a major player in global insurance, also gained full equivalence early on, reinforcing its integration with EU insurance markets.
Japan and the United States were granted temporary equivalence in the context of group supervision. This facilitates the supervision of multinational insurers like those operating across the US-EU or Japan-EU markets. For example, an EU regulator does not need to apply duplicative rules if the group parent is subject to comparable oversight in its home jurisdiction.
Temporary equivalence decisions are typically valid for a set period—initially ten years—and are subject to review and renewal. The EU expects that these jurisdictions will either maintain their regulatory alignment or progress toward permanent equivalence. EIOPA monitors these developments and may advise changes if there are concerns about divergence or regulatory weakening.
Notably, equivalence does not mean identical rules. It is a recognition that a third country’s regulatory framework produces comparable outcomes in terms of policyholder protection, financial stability, and supervisory effectiveness. This pragmatic approach allows cross-border operations to function more smoothly while respecting national regulatory sovereignty.
For countries that do not hold equivalence, EU insurers face additional requirements when dealing with reinsurers from those jurisdictions, and group supervision becomes more complex. This can create competitive disadvantages and encourage foreign regulators to align more closely with Solvency II principles.
UK & Brexit
It’s also important to note that the United Kingdom, following Brexit, initially retained Solvency II in domestic law. While it no longer requires equivalence recognition for EU insurers to operate in the UK, discussions about mutual recognition and regulatory cooperation continue. Solvency UK, the UK’s evolving regime, aims to be more flexible while remaining broadly aligned in areas like prudential soundness.
Conclusion
In conclusion, Solvency II equivalence is a crucial mechanism that enables cooperation and operational efficiency between the EU and third-country insurance markets. Countries that obtain equivalence gain strategic access to the EU market with reduced compliance burdens, while EU regulators maintain oversight through trusted partnerships. As the global regulatory landscape evolves, so too will the list of equivalent countries, shaped by political, economic, and supervisory considerations.