Bermuda to create an insurtech sandbox
Legislation to enable insurtech experimentation and innovation to be trialled in Bermuda is being tabled today by the Bermuda Government.
Not everyone will be able to play in the sandbox environment as eligibility criteria has also been proposed. It is for use by licensed insurers or licensed insurance intermediaries. The testing of financial technology will be to a limited number of clients in a live environment for a limited time period.
David Burt said the purpose of the Insurance Amendment Act 2018 is to create an insurance regulatory sandbox “which will further position Bermuda to maintain its status as a leading centre for insurance innovation”.
In a ministerial statement, the Premier said: “Technology-enabled innovations in the insurance industry or ‘insurtechs’ have emerged to offer simpler products and streamlined customer experiences. The challenge for many insurance companies is to determine the best way to embrace the financial technology imperative given their strategic vision and business objectives.”
Mr Burt, who is also Minister of Finance, noted that $724 million had been invested in insurtech during the first three months of this year, according to Willis Towers Watson and CB Insights’ Quarterly Insurtech Briefing.
“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,” said Mr Burt.
In an effort to overcome these hurdles, the Bermuda Monetary Authority has proposed establishing an insurance regulatory sandbox. The proposed sandbox eligibility criteria will be:
• technology must be new or use existing technology in a different way;
• research must be conducted in advance of the application;
• testing objectives must be clearly defined;
• an insurer or an insurance intermediary must demonstrate its understanding and assessment of the relevant risk;
• an insurer and/or an insurance intermediary must demonstrate that policyholders and counterparties are adequately protected against loss during the testing stage;
• an insurer and/or an insurance intermediary will be required to have a well-defined exit or transition strategy in case the testing is unsuccessful or discontinued; and
• an insurer and or an insurance intermediary must demonstrate that it has the intention, ability, and resources to deploy the relevant product, service or distribution channel upon successful testing and exit from the sandbox.
Mr Burt said the Bill will allow the BMA to “implement a prudential regulatory regime in relation to insurtech business by making a number of changes to the Insurance Act 1978 to introduce a new class of innovative insurers and innovative managers, brokers and agents”.
He added: “The global financial services market is highly competitive and companies will seek to use a variety of elements to support their business objectives at any given time — that includes the choice of domicile.
“The expansion of the insurance sector supports the Government’s mandate to expand the economy, to create jobs for Bermudians, and to increase revenue through the continued promotion and development of Bermuda as a first-tier international financial centre.
“This Bill will assist Bermuda in advancing its fintech ambitions, ensuring that we remain a centre of insurance innovation, by providing the opportunity for new and existing companies to create and perfect innovative insurtech products here in Bermuda.”
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