Bermuda has established itself as a leading (re)insurance centre, which has one of the world's largest captive and insurance-linked securities ("ILS") markets.
The Bermuda Government and the Bermuda Monetary Authority ("BMA") which regulates the financial sector, recognise the importance of disruptive innovation in the insurance and financial services industry (as was demonstrated by its collaborative approach to the development of Bermuda's ILS regulatory and legislative framework). As a further boost to the insurance industry and to provide protection to policyholders, the Bermuda Government and the BMA recently introduced a new legislative and regulatory framework for establishing insurers and insurance intermediaries that carry on business in an "innovative or experimental manner".
The Insurance Amendment Act 2018 amends the Insurance Act 1978 with effect from July 2018 and creates an InsurTech "regulatory sandbox" for the purpose of facilitating and promoting experimental and innovative applications of technology in the insurance sector. The BMA has also established an Innovation Hub to promote InsurTech innovation.
New classes of insurers
The new legislation creates two new classifications for innovative insurers:
- Class IGB - an insurer carrying on general business in an innovative or experimental manner;
- Class ILT - an insurer carrying on long-term business in an innovative or experimental manner.
There are also new classifications for insurance agents, brokers and managers carrying on their respective business in an innovative or experimental manner.
Innovative insurers and intermediaries may be formed as new start-ups or affiliates of existing insurers (or intermediaries) with a view to attaining proof of concept within a closely controlled environment in the sandbox.
For a limited period (generally six months to one year, which may be further extended), the sandbox will allow companies to test new technologies and offer innovative products, services and delivery mechanisms to a limited number of policyholders under the regulation and supervision of the BMA. Having reviewed a company's proposal, the BMA will determine the regulatory and legal requirements that would be modified for the duration of the sandbox and will apply appropriate safeguards to protect policyholders and counterparties. Once approved, a company will receive a temporary sandbox license (classified with an 'I' to indicate that the company is operating within the sandbox).
The intention is that upon exiting the sandbox, the company will be re-licensed and become a fully licenced insurer or intermediary under the applicable existing classes of insurer or intermediary.
Please contact any member of our team for further information on the sandbox eligibility criteria and application process.
The "Innovation Hub" has been established by the BMA to operate as a platform for exchanging ideas and information around the digital transformation of the global insurance sector.
The BMA has developed an internal working group which will meet and greet any companies within the InsurTech space – branded as the BMA's insurance innovative working group or "BMA IWG". This group may also be used by companies in advance of application for entry into the regulatory sandbox where the company is still in the testing stage and is not yet ready for proof of concept.
Companies who are interested can contact the group on its dedicated email account: firstname.lastname@example.org.
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