The Bermuda Monetary Authority (BMA) has proposed amending the Insurance Act 1978 to introduce a new innovative class for long-term insurers.

The BMA said in a statement that it believed market developments in the next decade will lead to a conflux of insurance, capital markets, artificial intelligence, and distributed ledger technology.

In a statement, the BMA said that the introduction of Class IILT was a response to its experiences following the implementation of the regulatory sandbox and innovation hub regimes three years ago.

The BMA said: “The introduction of Class IILT is a natural progression from the sandbox Class ILT, to ensure there is an appropriate class for companies graduating from the sandbox, where expected business models do not fit in any of the traditional classes upon graduation. This proposal is consistent with the Authority’s goal of providing a regulatory environment that appropriately protects policyholders while remaining conducive to product and technological innovation.”

It added: “The Class IILT is intended for, but not limited to, innovative business models, such as those insurers that utilise digital assets for their operations. Similar to Class IIGB, the Authority proposes that this class be structured and regulated using the same approach as Class IIGB insurers, and tailored to the unique and specific needs of long-term business.”

The BMA said that IIGB and IILT do not fall under commercial insurance frameworks but are more aligned with the objectives and approaches of the limited purpose insurers.

It went on: “Given that there is already significant flexibility in the existing classes, it is envisioned that the Class IILT regulatory framework will initially be for specific innovation (primarily the insurer business models that incorporate digital assets), as opposed to all innovation, which can be incorporated in the other classes (e.g., business models that provide indemnity coverage for digital assets in fiat currency, which can be appropriately regulated in another class). Nonetheless, the Authority will exercise a case-by-case assessment and is prepared to allow other innovations if the Class IILT framework proves to be the most appropriate for the proposed business models.”

The authority concluded by saying that it imagines that capacity for digital asset business insurance would increase, even though it is ‘currently scarce’. Embracing it, said the BMA, would enhance liquidity and risk transfer efficiency.