BANKING CHANGE I asked what CIMA would like to see from
the actuaries being asked to price these
new technology risks for feasibility studies
- given the lack of data, uncertainty and
immaturity of the market. Feasibility studies
that are robust and that have considered all
the plausible pros and cons, said CIMA. How
will you review and assess such feasibility
studies? ‘With caution’ was the reply.
Although CIMA does not yet licence any
entities which are either partially or totally
digital or blockchain based or indeed any
which include AI aspects, they are aware
that the auditing industry will also need
to institute plans to prepare their staff to
audit such emerging hybrid entities. CIMA
meets with auditors from time to time to
discuss CIMA’s risk management framework
and their expectations as this applies to
licensed entities required to be audited. As
applications are received and considered
for InsurTech and FinTech entities, no doubt
these conversations will become tailored to
the specifics of the new licensees.
CIMA did highlight that, on the funds
side, they have already seen around sixty
Segregated Portfolio Companies (SPCs)
formed, where the Segregated Portfolios
themselves are sub-funds related to
blockchain funds and other digital wealth
opportunities such as Bitcoin. Clearly there
is strong communication between the
different arms of the Monetary Authority
with a sharing of knowledge and experience
gained. When considering the sort of
training which will need to be provided for
CIMA employees to allow them to properly
and comprehensively evaluate InsurTech
submissions CIMA confirms that a number of
staff have attended InsurTech, FinTech and
RegTech Conferences and webinars. CIMA
employees are also active members of
the International Association of Insurance
Supervisors (IAIS) and are kept abreast of
all IAIS papers on InsurTech. To date CIMA
has not felt the need to out-source any of
these expertise.
So far our discussions had centred around
scenarios whereby a licenced insurer issues
policies covering the risks faced by an insured
which holds or transacts business in crypto
currencies. Yet we need to be prepared for
questions from prospective insurers who
not only provide policies covering these
emerging risks – but also wish to embrace
these new technologies within the formation
of the captive itself.
Delaware recently awarded a contract to
IBM to build a blockchain based corporate
filing system, building their own blockchain
in which they can automate the filling of
paperwork from businesses – starting with
SPV’s. In the summer of 2018 Vermont
announced they were engaging software
engineers to create a blockchain to record
the incorporation documents for captives.
Vermont, like Delaware, hopes this approach
will lead to efficiencies. They also hope this
will help attract those involved in any aspect
of the blockchain industry to choosing their
state as a domicile when considering a
captive.
CIMA is keeping a watchful eye on these
projects. CIMA has, to a large extent, gone
digital, and the Regulatory Enhanced
Electronic Forms Submission (REEFS)
system means that most of the submissions
from licensees are done electronically. Will
CIMA now consider accepting blockchain
corporate records as part of the due
diligence submitted by a prospective
captive? Maybe, if they consider there
to be a justifiable need in the future and
they implement such technology. I asked if
CIMA is considering, or has already initiated
enquiries to determine the feasibility of, a
similar enterprise to those embarked upon
by Delaware and Vermont, and the cost
savings and efficiencies which establishing
CAPTIVE INSIGHT