BMA targets insuretech companies with parallel initiatives
The Bermuda Monetary Authority (BMA) is launching what it describes as two parallel innovation tracks: an insurance regulatory sandbox (sandbox) and an innovation hub, both initially targeted at insurance technology (InsurTech) companies.
The BMA said that is creating these as it recognises the growing importance of disruptive innovation in the insurance and wider financial industry and the critical role that innovation plays in promoting efficiency and enhancing competitiveness in the market.
The Authority said that it is committed to the viability of the Bermuda insurance market, adding that Bermuda has been at the forefront of providing innovative solutions in the insurance, Insurance Linked Securities (ILS) and captive market. This has seen Bermuda grow into a leading and well-respected insurance financial centre. From a jurisdiction perspective, the Bermuda market has both the largest ILS and captive sectors in the world and contains one of the world’s largest reinsurance sectors. The BMA therefore wants to provide a regulatory environment that both appropriately protects policyholders and promotes and is conducive to the use of technology.
According to the BMA: "The sandbox is for companies that are looking to be subsequently licensed as insurance entities under Section 4 (Regular Insurers) or Section 10 (Insurance Intermediaries) of the Insurance Act of 1978 (the Act). The sandbox will allow companies to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of policyholders (or other clients) in a controlled environment and for a limited period of time.
"Having reviewed a company’s proposal, the BMA would determine the legislative and regulatory requirements that would be modified for the duration of the sandbox testing. This will be communicated to the company. The sandbox will have appropriate safeguards to protect the policyholders and counterparties of companies that participate in sandbox testing. For transparency, once approved by the Authority, a company will be assigned a temporary sandbox license in accordance with its business model. The sandbox license will commence with “I” as an identifier that the company is in the sandbox (i.e., ILT: Long-Term insurer; IGB: General business insurer; IM: insurance manager; IA: insurance agent; IB: insurance broker.) Upon the successful end of the testing period and on exiting the sandbox, the company will be re-licensed to existing Classes (i.e., Classes 1, 2, 3, 3A, 3B or 4 if a general business insurer, Classes A, B, C, D or E if a Long-Term insurer, Special Purpose Insurer, Insurance Manager, broker, agent or salesman) and fully subject to the relevant legal and regulatory requirements. Sandbox participants that conduct insurance manager, broker, or agent activities will receive insurance manager, broker or agent licenses, respectively, upon successful graduation from the sandbox."
Secondly the BMA is creating an Innovation Hub. Apart from InsurTech companies that would qualify for use of the sandbox, the Authority is keen to promote broader dialogue on innovative insurance solutions with all market participants, including those conducting activities that are not directly regulated by the Authority.
The Authority said that it has therefore created a working group (BMA insurance innovation working group or BMA IWG) that seeks to act as a platform for exchanging ideas and information. The Innovation Hub may also be used by companies that will eventually apply for entry into the sandbox when the concept is sufficiently developed e.g. cases where the company is still developing its thoughts and ideas and not yet prepared for proof of concept. In order to promote closer dialogue between BMA IWG and market participants involved in the development of various innovative solutions, the Authority has set up a central point of contact via a dedicated e-mail account.
It is expected that the sandbox and innovation hub will in future, be expanded to include other FinTech start-ups more broadly and specifically virtual currency businesses.
