Akinova gets first Bermuda Insurance Marketplace Provider licence

Akinova, a company that has created a platform for the transfer and trading of insurance and reinsurance risks, has become the first to receive an Insurance Marketplace Provider licence in Bermuda.

Akinova had previously become the first company to be authorised for an insurance regulatory sandbox licence from the Bermuda Monetary Authority (BMA).

Now, that’s been upgraded, as the Bermuda Monetary Authority (BMA) has given Akinova an “Insurance Marketplace Provider” licence.

The Insurance Marketplace Provider category was created in 2019 and positions Akinova to be able to operate a regulated marketplace in Bermuda.

Akinova claims this to be the first regulated insurance market since Lloyd’s was formed with an act of Parliament in 1871.

The new licence in Bermuda will allow Akinova to provide risk trading and transfer using its marketplace technology, in a fully regulated environment.

The company said the licence will also allow it to trade insurance contracts securities, or collateral, that is ancillary to the insurance business sourced, through cat bonds, notes or preference shares.

But licences and being regulated, or operating under regulation as all tech marketplaces effectively do, are only part of the challenge of getting wide-spread adoption of marketplace technologies.

This hasn’t been easy for any marketplace tech provider, as the entrenched insurance and reinsurance industry makes for a difficult environment to switch the physical trading flows within it to a truly digital-first approach.

We still need to see broadly syndicated risk placements and transfers being completed, before any company can really claim marketplace status as well, as bilateral trading, or electronic placement into a manually traded and executed market environment, doesn’t really make for a marketplace unless it’s happening programmatically or at scale.

Akinova has completed a number of small and mostly bilateral (we understand) trades, with a few made public (examples here, here and here). But in some cases, we’re told by brokers and markets involved, that the transactions could really have been as easily completed, or placed, without a platform being involved.

Electronic marketplaces must demonstrate how they can add efficiency to the process of risk placement and transfer, by more effectively matching risk and capital than manual processes can achieve, or by syndicating risk more broadly, effectively and rapidly than is possible using legacy market processes.

Marketplace tech has to lower the cost-of-capital for those using it, through more efficient trading, or reduce the cost and difficulty of accessing risk, through enhancing access to it.

Alternatives might be to demonstrate how you can bring new risks and capital to market, that wouldn’t otherwise have been accessible without your marketplace existing. Or to offer something really new, in terms of risk transfer product structure, perhaps.

Ultimately, to be successful, a marketplace has to be additive to the trading experience of the market, or transformative enough for market participants own businesses to gain broad adoption.

But, if there is no clear efficiency gain, tangible benefit, or unique selling point to be had by using them, then many of the marketplaces we currently see striving for success will ultimately fail to find a long-term place for themselves in insurance, reinsurance, or insurance-linked securities (ILS).

We hope this isn’t the case and hope to see many tech marketplaces and trading platforms succeed in insurance, reinsurance and ILS. The benefits for participants can be significant.

It’s ultimately good for the industry and in particular capital market investors and ILS fund managers, as marketplaces will level the playing-field, in terms of access to risk/capital, enabling bidding for participation on risks to be open and transparently facilitated across available programs and towers.

But, it’s really important not to get ahead of ourselves and licences alone do not make a marketplace.

That’s the challenge Akinova and others like it now face, as even after doing all the heavy lifting of creating the technology and receiving the licences where required, traction can still be very hard to come by in the electronic trading and marketplace space, within insurance, reinsurance and even ILS.