wave of countries being assessed for equivalence and is making extremely good progress. the first assessment of bermuda by eiopa was largely very positive, albeit with some further work to do in some areas. the protracted process of solvency ii implementation in europe has in fact given more time for bermuda and other countries to adapt their framework in order to be ready. following a further assessment by eiopa the ultimate decision will rest with the european commission, in consultation with other eu institutions. my view is that bermuda is very well placed for this assessment process and is to be commended for the work that jeremy cox and his team have undertaken to drive forward enhancements to the bermuda regulatory framework. these are by no means insignificant and have included the development of a risk based solvency framework and introduction of group solvency requirements. this is a significant accomplishment, although clearly more remains to be done. it may seem odd that recently europe has proposed a transitional equivalence regime which will allow the benefits of the directive to be enjoyed on an interim basis, allowing other jurisdictions to take a longer route to reforming their regulatory frameworks to broadly match that in europe. i wouldn ’ t be distracted by those developments. by being in the first wave of the equivalence assessment process and by hopefully winning a favourable outcome, bermuda will be in the enviable position of having definitively cleared the eu process before many other competitor jurisdictions are able to do likewise. that provides absolute certainty to the bermuda market as to the treatment it will receive under the eu rule book and unlike other countries means that the risk of adverse regulatory developments will not be hanging in the background. moreover, full equivalence recognition will cement bermuda ’ s reputation as a financial centre that is committed to high standards of regulation. there will, however, be continuing challenges in implementing the new framework on the ground. a regulatory framework is only effective as the supervision system that implements it. in bermuda, the three issues that i have flagged earlier will have local ramifications that need to be worked through. the bermuda solvency framework for life companies ’ remains to be finalised and the implications of a market consistent economic valuation approach on balance sheets still needs to be fully developed. the internal model approval process will, as in ireland and europe, be a big challenge for bermuda and will require some tough supervisory calls. and the new complex group structures of the post solvency ii world will require adequately resourced and high quality supervisors. let me reinforce that last point in the bermudian context

i would like to mention briefly is the impact of the directive on business models or, more narrowly, corporate structures. as i have mentioned, capital optimisation will inevitably be a key theme for the management of companies impacted by the directive. in addition to the use of models, revisions to corporate structures are to my mind likely to be a further avenue of exploration. in particular, in ireland we see considerable interest in the so called hub and spokes model. this involves choosing a single european jurisdiction as the location for the hub operating company and conducting pan european insurance business on a branch basis throughout various eu countries. as necessary, existing subsidiaries outside of the hub country are therefore transferred into branches. this has the dual advantage of consolidating operations, thereby reducing costs through economies of scale, and also crucially of optimising capital, as capital is no longer fragmented in each individual subsidiary. there are some prominent examples of the hub and spokes structure in europe involving ireland as the choice of hub. we will have to see whether this trend continues or not, although as i say there appears to be a compelling logic behind it. a challenge for the supervisor is the effective supervision of such structures. for our part, our starting proposition that the hub must have substance and be able to deploy effective controls over the operations of its branches. then, as a supplement, as a supervisor we too will assess branch operations directly or through the use of skilled persons such as auditors and consultants. finally there is a significant challenge of coordination between both home and host supervisors to ensure that all interested stakeholders are kept well informed. at the central bank of ireland we are very committed to ensuring that the appropriate regulatory framework is in place for hub and spoke operations and that our supervisory resources are adequate to the task of overseeing such operations. it will be interesting to see whether this model will grow as solvency ii gets closer to implementation. bis central bankers ’ speeches i have by now given you a sense of where solvency ii stands in the implementation process and a few of the key issues that are currently being debated or considered. let me conclude with a few words about the equivalence process and where bermuda stands. solvency ii requires that insurers from third country jurisdictions must be subject to a regulatory framework that is broadly equivalent to that within europe itself. absence of such an equivalence finding provides the prospect of a more punitive solvency treatment for firms from such jurisdictions. bermuda, along with switzerland and japan, is in the first