Bermuda blazes the trail
Every jurisdiction that leads the market at any time wants to
stay there, while those who are behind it want to overtake
Finding a unique selling point, or garnering an advantage,
is therefore key. Bermuda has in recent years grabbed not one but two
concepts that it thinks will give it some advantages in the near future.
The first is blockchain, the second is cryptocurrencies.
These concepts are both being heavily promoted by Bermuda’s
Progressive Labour Party government. Premier David Burt has often
mentioned these two areas in his trips to the UK and the US as he
promotes Bermuda’s openness and accessibility for new business.
Blockchain is very much in the news at the moment, with ChainThat’s
blockchain-powered risk and capital exchange the Bermuda Insurance
Exchange on the Island scheduled to go live with a production trial in
July 2019 (see story on page 32).
According to John Huff, chief executive officer of the Association
of Bermuda Insurers & Reinsurers, innovation through insurtech,
blockchain, and technology is taking the insurance industry by storm.
Stakeholders around the world are appreciating the importance of
comprehensive regulatory understanding and approval of these models.
As Huff points out to Bermuda:Re+ILS, Bermuda is leading the way.
Bermuda’s Insurance Amendment Act 2018 created a framework to
establish an ‘insurance regulatory sandbox’ to further position Bermuda
in maintaining its status as a leading centre for insurance innovation.
“Technology-enabled innovation in the insurance industry—
insurtech—has emerged to offer simpler products and streamlined
customer experiences,” said Burt on the introduction of the act. He
attended the George Washington University in Washington, DC,
double majoring in finance and information systems and attaining a
master’s degree in information systems development.
Hard work in the sandbox
Huff feels that the challenge for many insurance companies is to
determine the best way to leverage technology to achieve strategic
vision and business objectives.
“The Bermuda Monetary Authority established the insurance
regulatory sandbox to enable testing of financial technology by a
licensed insurer or a licensed insurance intermediary to a limited number
of clients in a live environment for a limited time period,” he explains.
The Bermuda sandbox eligibility criteria are as follows:
• The technology must be new or use existing technology in a different
• 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.
Huff adds that the global financial services market is highly competitive
and companies seek to use a variety of elements to support their business
objectives at any given time—including the choice of domicile.
“The sandbox assists Bermuda in advancing its ambition to remain
a centre of insurance innovation, by providing the opportunity for
new and existing companies to create and perfect innovative insurtech
products in Bermuda,” Huff says.
Tom Johansmeyer, assistant vice president at Verisk Analytics, adds a
note of caution about one leading area of insurtech.
“Blockchain has been the hottest new technology idea to hit the
re/insurance industry for several years,” he says. “Why hasn’t it taken
Bermuda has worked hard to place itself at
the forefront of technology and innovation in
financial services. Bermuda:Re+ILS examines
the recent developments.