Bermuda sandbox first for insurtech project
A milestone moment has been reached in Bermuda’s ambitions to be a leader in the insurtech sector.
An independent electronic marketplace for the transfer and trading of insurance risk has become the first company to be licensed to operate in the island’s insurance regulatory sandbox.
The business is AkinovA (Bermuda) Limited, a wholly-owned subsidiary of UK-based AkinovA. One of its initial products is said to be focused on cyber-risk transfer “to unlock explosive growth in this market, deliver for underserved customers, underwriters, reinsurers, capacity providers and ignite cyber-risk transfer at scale”.
It is 10 months since the Insurance Amendment Act 2018 was passed in Parliament. It paved the way for the Bermuda Monetary Authority to create an insurance regulatory sandbox where financial technology can be tested by a licensed insurer or licensed insurance intermediary to a limited number of clients.
The sandbox creates a live environment for a limited period, allowing the licensed company to assess its insurtech product in a controlled way.
AkinovA (Bermuda) Ltd, has been granted permission by the BMA to carry out business through its marketplace infrastructure in the regulatory sandbox. As such, it is the first company to be granted an innovative intermediary class licence by the regulator.
AkinovA is permitted to enable cedents and intermediaries acting on their behalf to transfer insurance and reinsurance risk to investors using an electronic platform. It is also allowed to provide news, data, analytics and communications to the marketplace participants.
While remaining an independent marketplace, AkinovA is working with companies in the insurance industry, including Hiscox and MS&AD Insurance Group.
AkinovA’s team and advisers have experience in insurance, capital markets, energy, and banking. Co-founder and CEO Henri Winand, was formerly chief executive officer of fuel cell firm Intelligent Energy, which was valued at $1 billion in 2014 at the time of an initial public offering. He was also vice-president, corporate venturing at Rolls-Royce plc, in the 2000s.
Dr Winand, has previously described the primary problem AkinovA seeks to solve. He said: “Reinsurance needs growth and profitability. This is caused by a long-term trend of increased competition from capital markets and industry inefficiencies.
“Extreme risks are becoming more volatile and intense which means that re/insurers need to access alternative capital from capital markets more often, faster and more cost effectively than ever before. In particular, insured cyber losses are less than 0.5 per cent of the $1 trillion (set to reach $6 trillion by early 2020s) annual bottom line losses.
“This situation results in numerous underserved customers and capital markets who already own these risks without a solution to effectively hedge their portfolios.”
He said the solution is AkinovA, describing it as a digitally native “one-stop shop, industry strength electronic marketplace with clearing and data analytics to deepen the marketplace, increase its liquidity whilst making sure the insureds are paid”.
In a statement from AkinovA, which announced the licence from the BMA, Dr Winand said: “We selected Bermuda as our first regulated operating base because of their willingness and desire to innovate within the insurance sector.
“The regulators understood, right from the word go, the need to establish an appropriate regulatory framework for what AkinovA is building for its users, to ensure AkinovA’s independence as an infrastructure provider and a digital marketplace.”
He said it was important that AkinovA is “not set to compete with the very ecosystem it serves”.
David Burt, the Premier, said: “One of the largest hurdles facing the global insurance sector is the challenge of bringing developments to market amid an insurance regulatory landscape that does not always provide the flexibility necessary to accommodate new concepts at the same speed as the technology develops.
He also said AkinovA brings together experience from insurance, capital markets and technology “that we believe is needed to launch a successful electronic marketplace for the (re)insurance industry”.
While Brad Adderley, AkinovA’s Bermuda counsel and partner at Appleby, said: “We are very pleased to help AkinovA forge and continue to develop what they need to serve their clients.
“We are grateful for the support we have had, and continue to have, from the BMA to develop the right framework needed for AkinovA to serve its clients as a pure-play infrastructure provider, whilst preserving its independence.”