In the face of the coming “insurtech tsunami”, Craig Swan of the Bermuda Monetary Authority has given pointers to the way ahead.
And it is all about moving forward, staying relevant and adapting to rapid changes.
Those are ingredients for Bermuda’s continued success in the reinsurance space, according to Mr Swan.
And the BMA’s managing director of insurance supervision detailed how Bermuda has demonstrated those qualities in the past and how the regulator intends to stay ahead of other jurisdictions.
He gave a presentation at the GR Innovation and Insurtech conference, which was hosted by Global Reinsurance and held earlier this week at Rosewood Bermuda, Tucker’s Point.
Mr Swan spoke ahead of a panel discussion on supervision, regulation and the impact of external influences in Bermuda.
He said history showed that “if you are not moving forward you must be moving backwards” and he engaged the audience by giving examples that were close to his heart, such as the LA Lakers basketball team and the Manchester United football club falling away from their glory years because they had failed to move forward.
In the business world, he highlighted the example of the once-world leading Firestone tyre company that failed to match the quality and reliability of new-style radial tyres. Its inability to reposition itself in the market led to it being taken over by Bridgestone.
Having given examples of the price to be paid for not moving forward, Mr Swan said the same was true for countries and regulators.
“The BMA has had tremendous success. We are one of only two regulators around the world that have preferential recognition on both sides of the Atlantic,” he said.
And turning to Bermuda he noted its leading position in reinsurance, captives and insurance-linked securities. That has been achieved by taking steps to move forward and gain a lead over other jurisdictions.
Mr Swan told delegates that Bermuda introduced ILS legislation in 2008, at a time when the island had “zero per cent” of the market. Cayman Islands was the “undisputed champ”.
He said Bermuda’s ILS market share has since grown to more than 76 per cent today.
But he warned: “Just as we attracted that to our shore, some other jurisdiction, if we take our eye off the ball, will take and eat our lunch. Because if we are not moving forward we must be moving backwards.”
With that in mind, he said the key to sustained success was to look at how to remain relevant. For the reinsurance sector there were challenges, including high expense ratios and the demands of the millennial generation who live in an age of social media, instant connectivity and “crave a new customer service”.
All this has paved the way for insurtech, which Mr Swan said was unstoppable.
“So with the insurtech tsunami on our doorsteps, what is the BMA doing to remain relevant?” he said.
He mentioned the creation of an insurance innovation group that acts as “a convenient contact for insurance innovators and would-be start-ups”.
Mr Swan added: “We are in dialogue with regtech [regulatory technology] service providers so that our systems will be aligned with these regtech solutions that those companies are building for our industry.”
On the regulatory front, he said it was not the BMA’s desire to regulate the technology, such as blockchain and artificial intelligence, but its focus will be “on the inputs, the governance and controls around, and the outputs of, the insurance technology”.
Regarding the insurtechs that will fall within the BMA’s legislation, Mr Swan said: “For those, our expectation is that they will have a physical presence on island that is commensurate with the nature, scale and complexity of their operations.”
He said the BMA would not expect such entities to be no more than “a brass plate or sign that says Bermuda company, and there is nothing there”.
“We are expecting a presence and proportion physical commitment to the island.”
Mr Swan told delegates: “The BMA, the Bermuda Business Development Agency, and the Bermuda Government recognise that if we do not proactively position ourselves to be relevant before the insurtech tsunami comes our way then we will be among those jurisdictions left wondering ‘what happened?’ because they were not moving forward.”