George Alayon – Assistant Director in Insurance Supervision at the Bermuda Monetary Authority (BMA). George leads a small team whose responsibility is for pushing the insurance agenda of the authority. They oversee the insurance regulatory sandbox and Innovation Hub as well as the supervision of innovative insurers here in Bermuda. In this podcast we discuss the influential role the BMA plays in fostering innovation in the insurance industry.

 

What is blockchain?

Blockchain is a digital ledger where information can be stored, duplicated, and distributed across a network of computers whilst being cryptographically protected. For George, it is the opposite of the traditional way of storing information in a centralised manner where there is no single point of failure. This traditional process also may or may not result in the production of digital assets.

 

Introduction to the Bermuda Monetary Authority (BMA)

The BMA is the sole regulator of insurance companies, banks, trust companies, investments, the Bermuda Stock Exchange and credit unions. Recently they were given the mandate to regulate digital assets.

Locally they issue the Bermuda currency which is pegged to the US dollar.

As the sole financial services regulator on the island, they pride themselves to being responsible for maintaining Bermuda’s reputation as a top jurisdiction of choice especially for insurance and reinsurance.

Bermuda is one of a few jurisdictions in the world that have gained full solvency to equivalence from the EU, as well as having obtained both qualified and reciprocal jurisdiction status from the US NAIC.

In 2018, Bermuda was one of the first countries in the world to offer a comprehensive regulatory framework for digital asset businesses.

 

Evolution of insurance and digital assets

BMA defines digital assets to be anything that exists in binary format, and comes with the right to use it and includes a digital representation of value.

In George’s view, blockchain technology is a gateway to revolutionise the financial sector. Blockchain technology allows for the seamless exchange of information related to the basic elements of a contract including the consideration. In the case of insurance, consideration includes the premium paid by the insured in exchange for payment of claims in case of a loss event.

Historically the insurance industry has been heavily reliant on manual processes. The arrival of blockchain technology has given rise to a thriving digital asset business sector, which has forced the insurance industry and the rest of the financial services sector to rethink the way they operate and the future role they will play in this ecosystem.

Over the next two to three years, George sees a lot more market acceptance with the integration of digital assets, as a medium of exchange for insurance policies, as well as a utility pass or access to DLT based ecosystems.

 

Regulators role

The insurance industry is inherently risk averse.

One of the regulators biggest concerns is whether these technological breakthroughs have policyholder protection has as top of mind? Do they disclose enough information for parties to make an informed decision? How are companies thinking and preparing for the worst case scenarios?