Lego bricks and sandboxes were part of a business conference discussion on fintech, insurtech and opportunities for Bermuda.
The question of supervision, regulation and external influences on Bermuda regarding tech-based start-ups was the focus of a panel conversation at the GR Innovation & Insurtech conference this week.
Having strong and respected regulation is one of the key elements, said Stephen Weinstein, general counsel and chief compliance officer at RenaissanceRe.
Speaking about reputational risk to offshore centres, he said: “The conduct of real enterprises, with real physical presence in jurisdictions that have the highest level of co-operation and transparency, seems like the rock I want to stand on right now. And I think Bermuda exceeds all of those criteria.”
The conference was hosted by Global Reinsurance at Rosewood Bermuda, Tucker’s Point, and centred on new technologies and their likely impact in the insurance and reinsurance space.
Chris Garrod, director at Conyers Dill & Pearman, who has been involved in the formation of cryptocurrency vehicles using blockchain-based platforms, noted that the insurance industry is extremely paper intensive, but also needed to have extremely secure data and a robust mechanism to verify that data.
“Having blockchain and having the ability to verify secure data that is also decentralised, really fits with the insurance industry,” he said.
When the discussion turned to how to achieve the right balance of regulation and privacy, Stuart Lacey, chief executive officer of Trunomi, injected the concept of Lego bricks as he spoke about the benefits of having globally accepted regulatory requirements.
Trunomi is a financial technology company founded in Bermuda. It has created patented technology that can simplify the process of sharing personal data, in particular between individuals and financial institutions.
Mr Lacey said: “We believe people ultimately own the data they create, whether that is identity, biometrics, whatever.”
Industries that need information about an individual’s identity, for example insurers who need to assess pricing and risk, largely need access to some portion of that personal data set.
Mr Lacey said: “Large global companies have the challenge that they operate in multiple jurisdictions. So they are looking for solutions that can be met technologically across a spectrum of jurisdictions.
“Start-ups like ourselves want to offer technological solutions that can be used across a spectrum of jurisdictions.”
He noted that regulators have a mandate to protect their jurisdiction, and said the Bermuda Monetary Authority has done “a brilliant job” in Bermuda.
But he said the primary mandate for regulators in individual jurisdictions was not to be homogeneous when it comes to global standards.
“Therein lies the challenge, and that is how we can work together — both industry and start-ups — with regulators that are doing really good jobs but being extremely careful,” he said.
“One thing I have recommended is this idea of Lego bricks; they are all defined in the same way that they connect together.
“What we ask regulators, as regtech [regulatory technology] globally, is to give us Lego bricks. Then allow us to build something beautiful.”
He explained that this meant being able to learn the requirements regarding identity, electronic signatures and such like, that will be valid in jurisdictions on a global basis.
“Without those fundamental building blocks being normalised it makes it really hard for global companies to scale across jurisdictions, and for technology companies to migrate those systems on a global basis.”
Craig Swan, managing director of supervision (insurance) at the BMA, said for Bermuda to evolve it may have to consider sandboxes to safely test start-up ventures and emerging concepts.
Mr Swan said: “When we think of the benefits of the sandbox — it allows one to prove a concept within a protected environment. But more so, and this is key for Bermuda, it allows the regulator to identify those aspects of regulation that will inhibit technology.
“And it’s not that we just want to remove regulation, but when you think of some of the reasons that regulation is set up for — it is set up in a context, it’s not a vacuum. And it is set up because of the way business is being done.”
He said if the way a business is being done changes, then the regulation tends to lose its relevance.
“So for us to remain a jurisdiction of relevance, we have to adjust and evolve and move forward, and a sandbox might be the way,” he said.
Mr Lacey did not think a sandbox was a prerequisite for Bermuda to be successful in the fintech and insurtech space. He said the majority of start-ups are involved in ventures that don’t need regulatory oversight.
“What we need, and what Bermuda has in spades, is real businesses with real problems,” he said.
“Start-ups need access to global companies, working closely with them to see what isn’t working and integrate to work with them. We need access to capital, a network, mentorship, great IT — all things Bermuda has that already permit it to be an absolute leader in this space if it chooses to so act.
“It does not require sandboxes or some regulatory change. Those things would be tremendously additive, but it is not a precondition.”
Mr Swan responded by saying he felt sandboxes were “pretty key” but not required if the entity is not going to be regulated, or if the concept is already working and has been proven.