An Innovation Hub for the Insurance Industry
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Creating an Environment of Innovation for the Insurance Industry
Over the past few years, innovation has continued to play a larger role in the insurance industry. From the usage of big data and artificial intelligence to smartphone apps and the growth of digital assets, technology — or more specifically, “InsurTech” (Insurance Technology) — has dramatically changed the up-front customer experience and continues to transform the back-end of the insurance industry as well.
In keeping with its status as a global innovator, and as one of the world’s most important insurance and reinsurance markets, Bermuda continues to lead this movement with the convergence of insurance, capital markets, and digital assets.
Bermuda envisions that the insurance sector will increasingly embrace digital assets, or the token economy, to enhance liquidity and the efficiency of transferring risk. That’s one of the many reasons the Bermuda Monetary Authority (Authority or BMA) has developed its insurance regulatory sandbox and innovation hub, to encourage and nurture further innovation in the insurance and wider financial services sectors.
These tracks allow disruptive companies to test new methods and technologies in a collaborative space where the regulator helps them evolve before they venture into the marketplace. Generally, there are two main types of innovators taking advantage of these opportunities: traditional reinsurance companies that have InsurTech projects, and new InsurTech companies that need to pilot, test, and launch their innovations before going to market.
Each approach has its own benefits — the sandbox primarily benefits companies that are eventually looking to obtain a regular insurance entity licence and need a place to test new technologies and offer innovative products, services, and delivery mechanisms to a limited number of policyholders (or other clients) in a controlled environment. Other benefits for sandbox participants include: formal guidance ensuring proper regulatory safeguards are in place, possible greater access to funding, and increased efficiencies in reaching the market with new products.
As for the innovation hub, it serves companies that will eventually apply to the sandbox once their concept is sufficiently developed — i.e., those that are not yet ready for live tests. Its benefits include: a formal dialogue with the BMA so they can help develop innovative solutions for the global industry; the ability to determine future implications of business activities from a regulatory perspective, thereby reducing uncertainties; and a reduced time bringing innovative ideas to market. The innovation hub can also be used for entities providing non-licensed or outsourced services for regulated entities.
These efforts underscore Bermuda’s history of innovation in the insurance industry. Known as “the world’s risk capital,” Bermuda was the first to:
- Create the captive insurance model back in the 1960s
- Develop the evolution of a best-in-class ILS market
- Offer the first excess liability carriers
- Market property catastrophe and “cat” bonds
The BMA has also created a non-sandbox innovation class (Class IIGB) to further capitalise on the island’s spirit of innovation. This regulatory framework may be used for novel business models, such as insurers that incorporate digital assets into their business models.
Bermuda also stands at the vanguard of the digital assets sector with the passage of the Digital Asset Issuance Act of 2020. Replacing initial coin offering legislation from 2018, this act puts all digital asset issuances under the purview of the BMA, giving it the ability to adjust guidelines to respond more quickly to the needs of developing companies.
Bermuda’s reputation for innovation was furthered with the global 2020 Bermuda Tech Summit, which convened world-renowned leaders to discuss digital transformation and the ways businesses and industries have evolved due to technological advancements and changes wrought by the coronavirus pandemic. This continually forward-thinking, paradigm-changing work enhances Bermuda’s standing as an innovative, globally connected business community.
For those seeking to do business in Bermuda — or just interested in sampling the country’s inimitable combination of high-functioning business and comfortable island living — the country now offers a Work from Bermuda Certificate, which allows digital nomads and remote-working professionals to work on the island for a year. Those coming to Bermuda will find a beautiful environment populated with internationally experienced professionals, including lawyers, accountants, administrators, bankers, and independent directors.
To smooth entry onto the island, the BDA’s concierge service provides unparalleled personalised service that includes networking opportunities, introductions to Bermuda business and government leaders, assistance with permits and licensing issues, and much more.
So in summary, Bermuda is an island with a rich history of innovation and world-class business talent that punches well above its weight and competes with the biggest markets in the world. All of this exists in an environment with beautiful ocean vistas, spectacular sunsets, and a relaxing, enlivening culture. It’s no wonder the spirit of innovation thrives here.