Bermuda’s insurtech revolution

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  • Appleby's Amanda Burns

    Appleby's Amanda Burns


Bermuda has been at the forefront of innovation since survivors of the Sea Venture shipwreck settled our shores. Successor generations grew from strength to strength, finding ways to survive on an island with limited natural resources.

The insurance industry proved to be our biggest success. Bermuda remained innovative in insurance by (i) being the birthplace of captives in the 1960s, (ii) offering unparalleled amounts of directors and officers liability in the 1980s, (iii) showing our capacity to take on risks after Hurricane Andrew in the 1990s, (iv) wowing the corporate world in the 2000s with our willingness to pay claims quickly after 9/11 and Hurricane Katrina, and (v) leading the development of insurance-linked securities to now boast the largest sector in the world. Bermuda has had a multi-decade track record of insurance innovation.

In 2018, we carry this innovation into the future. Last month the Bermuda Monetary Authority (BMA) released a consultation paper on the Insurance Regulatory Sandbox, including the Insurance Amendment Act 2018.

The BMA will launch two parallel innovation tracks: an insurance regulatory sandbox (Sandbox) and an innovation hub (iHub), both initially targeted at insurance technology (insurtech) companies.

A sandbox is a space where companies can test new technologies and offer innovative products, services and delivery mechanisms to a limited number of customers in a controlled environment and for a limited period of time.

The process has four stages:

• Application: the application includes a cover letter, constitutional documents, net worth statements and a business plan verifying that the company satisfies the BMA’s eligibility criteria.

• Review: having reviewed a company’s proposal, the BMA will determine the legislative and regulatory requirements that would be modified for the duration of the Sandbox testing.

• Proof of concept, i.e. the Sandbox: upon final approval, the company will be assigned a temporary sandbox licence. In the Sandbox there is one licence available for long term insurers and one licence available for general business insurers; there are no special classifications. Sandbox licences are designated by the letter ‘I’ and are ILT, IGB, IM, IA and IB for long term insurers, general business insurers, insurance managers, agents, and brokers, respectively.

• Deployment: upon successful completion of the Sandbox, the company must submit a final report to the BMA on the outcomes of the testing including client feedback on the products, services and delivery mechanisms. After an in-depth consideration of the company’s business model and any other legal and regulatory requirements, the company will be relicensed in accordance with the existing insurance company classes.

The BMA will begin accepting applications to the Sandbox from July 1, 2018. A list of the companies approved to operate under the Sandbox will be posted on the BMA website for transparency to the public.

As with all companies operating within Bermuda, companies testing in the Sandbox must conduct business in a prudent manner and will be subject to Bermuda’s robust regulatory environment. This includes compliance with the anti-money laundering and antiterrorist financing legislation and regulations as provided in the Proceeds of Crime Act 1997, the Anti-Terrorism (Financial and Other Measures) Act 2004, the Proceeds of Crime (Anti-Money Laundering and Anti-Terrorist Financing) Regulations 2008 and any other international sanctions in force in Bermuda. The Sandbox will not be allowed to be used as a means of circumventing legal and regulatory requirements or to benefit from regulatory arbitrage.

The iHub is a platform for exchanging ideas and information; it facilitates dialogue between the BMA and market participants. This space is intended for a company still developing its thoughts and ideas and not yet prepared for the Sandbox.

For an island of only 21 square miles, with a population of only 60,000 people, we have managed to become a global centre of excellence with an innovative infrastructure in a sound regulatory environment that is ripe for further evolution. The BMA will use the experience arising from the Sandbox and iHub to update the framework when required to avoid unnecessary discouragement of innovation while maintaining adequate policyholder protection.

The Insurtech Sandbox has a continued role in this evolution and will allow insurers to test new initiatives, gain valuable market data, and reduce their time to market at a lower cost.

Attorney Amanda Burns is an associate and a member of the Corporate Team at Appleby. A copy of this column is available on the firm’s web site at www.applebyglobal.com

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer

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Published May 4, 2018 at 8:00 am (Updated May 3, 2018 at 10:12 pm)

Bermuda’s insurtech revolution

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