Reassuringly hard: The regulatory formula behind Bermuda’s insurtech edge
Leonie Tear, of Walkers, says Bermuda’s high regulatory bar makes the island the right home for the next wave of insurtechs, digital assets and innovation.
Bermuda has worn an undisputed crown as the risk capital of the world for decades. From pioneering captive insurance in the mid-20th century to establishing sophisticated special purpose insurers (SPIs) and collateralised insurance-linked securities (ILS) structures, the island has built a reputation on two pillars: deep capital reserves and world-class regulatory standards.
When the digital asset revolution began knocking on the doors of traditional finance, Bermuda stepped up and is now home to multiple large fintech companies. The convergence of the two industries for Bermuda to become a world-calss insurtech hub was almost inevitable.
According to Leonie Tear, partner and regulatory specialist at offshore law firm Walkers, the collision of high-speed Web3 innovation and traditional insurance oversight has also confirmed a persistent theme. Bermuda is highly supportive of innovation, but it is not a shortcut.
The ‘light-touch’ fallacy
“The number one misconception is assuming that because Bermuda is supportive of innovation and has issued over 10 innovative insurance licences over the past few years, this means it will be a light-touch regulatory process,” she explained. “That is not the case and nor should it be.”
Instead, Tear asserts that the complianced focused barrier to entry is precisely what makes the jurisdiction valuable.
“It is reassuringly hard; the process is as robust for innovative insurers as it is for traditional insurers. This is important as it will allow Bermuda to be the long-term home for innovative insurers.”
For founders accustomed to the ‘move fast and break things’ ethos of early stage software development, the discovery that the Bermuda Monetary Authority (BMA) maintains an unyielding standard can seem like a barrier. But this serves a critical macroeconomic purpose. It ensures that the businesses taking root on the island are built to withstand market cycles and systemic shocks.
Familiar paths, sophisticated rails
To understand why Bermuda’s innovative frameworks have succeeded where other jurisdictions have stumbled, one has to look at how these classes were constructed. Under the BMA framework, licences such as the Class IIGB (Innovative Insurer – General Business) and Class IILT (Innovative Insurer – Long-Term), which companies such as Meanwhile use to operate entirely in Bitcoin, do not bypass traditional rules.
Tear explained: “The nice thing is, they do not fundamentally differ from traditional licensing paths. The licensing path is comfortingly familiar and on par with traditional commercial general and long-term insurers, respectively. The rigour of the process is the same, the prudential and regulatory standards are the same, the high compliance expectations are the same.”
This parity is crucial. Bermuda’s traditional reinsurance market enjoys hard-won regulatory equivalence status with the European Union’s Solvency II directive and is recognised as a qualified jurisdiction by the US National Association of Insurance Commissioners (NAIC). If the BMA were to dilute its standards for innovative classes, it would risk compromising the international credibility that powers its multi-billion-dollar traditional market.
By keeping the entry standards aligned, the BMA ensures that innovative insurers can inherit the same global respect and access.
The difference that sets Bermuda apart isn’t the height of the hurdle; it is the capability of the referee.
“The difference is that the BMA has the skillset and sophistication to enable the same standards to be applied regardless of whether digital assets rails are used, fiat to crypto exchange is required or AI is built into processes and outcomes.
“The BMA maintains a technology neutral, risk-based approach that enables businesses that are licensed in the jurisdiction to test novel re/insurance solutions and effectively and prudently scale their business,” Tear noted.
The power of ‘substance over form’
At the heart of the BMA’s approach is the legal and practical doctrine of ‘substance over form’. In traditional, onshore jurisdictions, regulators often struggle with bureaucratic turf wars. If a digital asset looks like a security, behaves like an investment, but is packaged as an insurance product, it can trigger multiple, conflicting licensing requirements.
Bermuda bypasses this administrative friction by focusing on the functional reality of the asset or service rather than the software housing it.
Tear summarised that: “The substance over form doctrine means the BMA’s supervisory approach is to consider the economic and functional reality and characteristics of a product or service rather than their technological implementation. This allows the technology to evolve at pace with the regulatory oversight remaining the same, at a higher, outcomes-based level.”
This outcomes-based methodology means that as decentralised protocols, smart contracts, and AI systems shift in design, the overarching regulatory expectations remain steady. Rather than scrambling to rewrite the rulebook every time a new blockchain protocol or software framework emerges, the BMA simply asks: What is the underlying economic risk, who holds the exposure and how is client capital protected?
This flexibility is supported by the BMA’s dual-sector expertise. By regulating both traditional insurance and digital assets under the Digital Asset Business Act (DABA) within the same regulatory house, the BMA has developed an institutional memory that is virtually unmatched onshore.
“The BMA’s deep-rooted and meaningful understanding of the two sectors provides it with the skills and expertise to understand how to effectively regulate and supervise insurance and fintech combined. The BMA’s regulatory approach, unlike others, is not prescriptive and rigid; instead, the BMA applies a risk-based supervisory model that allows flexibility with proportionate oversight,” Tear explained.
Taming the volatility of DeFi
This sophisticated regulatory oversight is urgently needed to address the widening insurance gap in decentralised finance (DeFi). In DeFi, transactions are executed autonomously via smart contracts, bypassing central intermediaries. The speed – which Tear described as unprecedented – and cost efficiency of these systems have drawn significant capital interest, but they also introduce unique, systemic risks.
Historically, traditional insurers have steered clear of underwriting DeFi protocols. The obstacles are steep: a severe lack of historical loss data, a poor understanding of how smart contract vulnerabilities manifest and a lack of clarity regarding who is actually responsible when a decentralised protocol fails. Actuarial models designed for traditional property and casualty risks simply fail when applied to an autonomous software loop.
According to Tear, a new class of risk specialists is stepping in to solve this problem, leveraging Bermuda’s corporate toolkit.
“What is now emerging to address this gap is a new class of entrant: former crypto founders and leading fintech entrepreneurs who see a lucrative market with many underserved clients and little competition.
“They are teaming up with experienced and veteran insurance personnel to leverage underwriting expertise with deep decentralised finance knowledge to develop sophisticated algorithmic risk models, pricing models that can conduct multi-factor analysis instantly and claims management tools that allow for real-time optimisation.”
To execute these structures legally and safely, innovators are heavily relying on Bermuda’s segregated account company (SAC) legislation. By using SACs, insurers can establish distinct pools of assets and liabilities entirely legally ring-fenced from one another.
Tear explained: “The use of SACs allows for legally enforceable segregation and ring-fencing. This allows an entity to issue premiums and pay claims denominated in Bitcoin from one cell, with another cell utilised for premiums and claims in Ether, ring-fencing each from contamination should there be a significant fluctuation in the value of the other. SACs can also be utilised to create separate risk pools, allowing allocators to benefit from portfolio diversity.”
Survival of the compliant
As tokenisation, smart contract-driven parametric insurance, and on-chain capital pools continue to mature, Bermuda is positioning itself first as the laboratory, then as the permanent institutional foundation for these technologies.
Tear said: “Bermuda is home to a wealth of leading global (re)insurance companies and hosts some of the biggest names in digital finance, including Kraken, Coinbase and Circle as well as being the birthplace of some of the most innovative insurers in this sector, such as RELM, OnRe, Meanwhile and Soter Insurance.”
She said the long-term outlook for the jurisdiction is clear. Bermuda’s decision to maintain its gold-standard expectations is a deliberate strategy designed to attract only the most serious players who intend to succeed and scale.
“The entities that establish here will be the ones that are around in decades to come, the ones that grow globally, the ones that institutional and retail customers alike can rely on safely,” Tear said.
The rigorous standards that scare off casual founders are exactly what will keep the island at the top of the global financial hierarchy.
Tear concluded: “In a decade’s time, I have no doubt Bermuda will remain the insurance and fintech offshore jurisdiction of choice for compliance-focused digital asset and insurance companies, with a flourishing insurtech sector bridging the two.”
Leonie Tear is a partner and regulatory specialist at Walkers. To find out more about Walkers, visit www.walkersglobal.com.
For more news on Bermuda Risk Review 2026, click here.
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