Filling the coverage gap – emerging risks and innovation in Bermuda

Recent insurer registrations reported by the Bermuda Monetary Authority (BMA) show that Bermuda continues to deliver on its established reputation for finding innovative solutions for capacity shortages. Four factors underpin the success story:

  • Bermuda’s established reputation for responsible regulation of complex emerging risks.
  • Bermuda’s recently-developed reputation for responsible regulation of digital assets business.
  • The development of a “regulatory sandbox” for innovative and experimental uses of technology in the conduct of insurance business.
  • Innovative use of technology in electronic trading and matching risk and capital.

Emerging risks and innovation in Bermuda


Crypto-assets are a new and rapidly expanding asset class touted with a total market capitalisation of $300 billion.  The industry has been described as suffering a “dramatic” lack of insurance capacity, which is of such significance as to represent a critical obstacle to the mass adoption of crypto-assets as a store of value and medium of exchange. Due to the highly specialised nature of underwriting the risk associated with crypto assets,  few insurers operate in the sector.  

Bermuda has led the way in aiding industry unlock capacity in this challenging area. Early in 2020, the BMA registered Nakamoto Re, a Class 1 (single-parent captive) insurer reportedly providing US$200 million of liability coverage to the US-based Gemini crypto-currency exchange in respect of its cold wallet custodial activities.

Nakamoto Re was followed by the registration of a small commercial insurer, Evertas, which is expected to issue policies for theft or loss of crypto-assets.

More recently, in May 2020, Relm Insurance Ltd. was registered as a Class 3 (captive) insurer whose business plan reportedly includes insurance of cryptocurrency risks.

Lawful cannabis businesses

Crypto-assets are not the only emerging risk in which Bermuda is demonstrating its ability to unlock new capacity. Following the BMA’s Notice of 12 November 2019, confirming an in principle no-objection to the insurance of overseas cannabis businesses that are lawful at all levels (including federal) within the countries in which they are conducted, at least one overseas cannabis business has registered its own captive in Bermuda, namely, Canopy Growth Corporation Insurance Limited, a Class 2 insurer. Furthermore, it is understood that Relm Insurance Ltd., referred to above, plans to write cannabis- and hemp-related risks.

The BMA’s Notice was a helpful and pragmatic response to demand for coverage in this developing area. In providing a “green light” for coverage of lawful businesses, the regulator also demonstrated its commitment to the detection and prevention of money-laundering by emphasizing the need for registrants to understand fully all applicable foreign laws and to take appropriate precautionary measures, including conducting a risk assessment of their clients.

Digital assets and insurance/use of the “regulatory sandbox”

In June 2020, Nayms Ecosystems was registered under the Insurance Act 1978 as an innovative general business insurer (IGB) and as a Class M digital asset business licensee under the Digital Asset Business Act 2018.

An IGB is an insurer carrying on general business in an innovative and experimental manner. The IGB license is a creation of 2019, reflecting the use of the “regulatory sandbox” developed by the BMA for the trialling of new uses of technology by insurers and insurance intermediaries in a safe regulatory environment, until the registrant demonstrates “proof of concept”.

Nayms Ecoystem’s business plan is said to provide coverage for digital assets risks and to use digital assets such as crypto-currencies as collateral for special purpose business (ILS and alternative capital). The choice of Bermuda as the domicile for this entity reflects the jurisdiction’s prominence for ILS and its reputation for professional expertise in the area of digital assets.

Electronic platforms/trading

No less ground-breaking was the creation of an "insurance marketplace" licence, for intermediaries providing electronic or other platforms for the purpose of buying, selling or trading contracts of insurance. This novel licence class provides the ideal regulatory environment in which to develop trading platforms using distributed ledger technology, price discovery algorithms and other techniques which promise greater efficiencies in the sale of insurance and a more direct, disintermediated process for matching risk with capital. At least two such platforms have been tested in Bermuda. AkinovA (Bermuda) Ltd. has recently graduated from a sandbox licence (an instance of a registrant’s successfully passing the proof of concept phase, referred to above) to become Bermuda’s first fully-fledged insurance marketplace provider.


Bermuda insurance regulation continues to adapt in response to developments affecting the industry. At the forthcoming 2020 Bermuda Captive Conference (9-11 September 2020), the jurisdiction’s reputation for expertise and its agile and responsible regulator will no doubt impress attendees considering setting up a captive.