The Bermuda Monetary Authority has opened an application process designed for insurers interested in experimenting with new technologies within a relatively risk-free and carefully modified regulatory environment. A regulatory sandbox is a new and extremely relevant concept as the insurance industry expands in non-traditional ways and leverages new technology. Here are a few examples of how a regulatory sandbox would be of interest to a captive insurance organization.
The Future of Captive InsurTech
Technologies like cloud-based underwriting software have made it possible for captive insurers to assess risk and offer customized policies to insureds, but this is hardly the endgame for cloud-based insurance software. Innovations in delivery mechanisms, services and products are in the tech pipeline.
Captive insurance technology holds the possibility of harnessing the cloud to back their global operations across geographies while remaining in compliance with localized regulations. Currently, captive insurance technology is poised to feature smart contract platforms and secure blockchain data storage and transfer between third parties. BMA’s sandbox can support these developments and increase their speed to market, but will captives use BMA’s regulatory sandbox?
Benefits of a Regulatory Sandbox
Time to Market
The closer a captive is to adopting new technology, the likelier it is to benefit from time in a regulatory sandbox. BMA suggests that organizations spend no more than six months in the sandbox. While there, BMA temporarily and conditionally lifts some regulatory guidelines so that organizations are free to run new delivery methods and products without the worry of compromising policyholder data or privacy. During the final stages of development, this type of low-risk testing is vital. Adjustments can be made and security methods tested prior to rollout.
Transparency for Policyholders
To successfully enter the sandbox, captives must be transparent with their policyholders. These individuals and entities must be informed of potential risks and captives must be granted permission to use their policies in an experimental environment. In return, captives must offer contingency plans to recoup any losses stakeholders or policyholders may experience should the tech experiments go awry. Transparency is beneficial in that it builds loyalty and proves to stakeholders that an organization is fully capable of adapting within the competitive captive market.
The Regulatory Sandbox Application Process
The application process is designed to identify organizations that are developing innovative products and services. But BMA is also seeking products and services that have the capacity to provide measurable success. Captives must also adhere to anti-money laundering and anti-terrorism financing procedures.
Eliminating fly-by-night organizations will ensure the regulatory sandbox maintains a positive reputation. Newer captive organizations that are seeking recognition for insuretech innovation will likely consider using the BMA’s regulatory sandbox.