Help us help you on insurtech, regulator asks insurers

Moshe Bareket Photo: Tamar Matsafi
Moshe Bareket Photo: Tamar Matsafi

Israel's Capital Market, Insurance and Savings Authority has issued a consultation paper on boosting technology investment in the insurance industry.

The Capital Market, Insurance and Savings Authority wants to encourage insurance companies and other financial institutions to invest in insurtech companies, and is wondering how to do so. Today, the Authority released a consultation paper on "Relaxations for Investment in Insurtech", in which it calls on supervised entities to share with it the barriers that stand in the way of investment in insurtech ventures, and what they think the Authority should do or change in order to boost investment in technology ventures for the insurance industry.

"Development and encouragement of entrepreneurship will bring added value for the insurance market, boost competition in it, improve the product offering and service to the customer, improve the interface and feedback in the distribution chain, strengthen controls and documentation, and bring about greater efficiency as a result of automation of processes and business innovation," the paper states. The Authority, headed by Moshe Bareket, therefore wants to identify barriers that make it difficult for insurance companies to invest in insurtech ventures and in developing insurtech infrastructure.

The Authority says that the barriers may lie in its own directives. It states in today's consultation paper that "these obstacles may stem from, among other things, existing capital requirements in the Solvency II Directive (capital requirements that the Authority itself dictates in the local market, in line with the capital regime in the insurance industry in Europe, R.S.)", and "from requirements of the regulator's investment rules" or "from other regulatory requirements."

In the paper, Deputy Capital Market, Insurance and Savings Commissioner Abed Hasdia offers a series of possible solutions "in order to examine whether and how to encourage insurance companies in insurtech ventures." Among other things, he suggests an idea whereby "relaxations in the Solvency II regime" may be allowed such that a held company that deals in insurtech will be classified as a strategic company, leading to a reduction in the capital requirement applying to the insurance company on account of this holding.

He also raises for discussion with the market the possibility of "a relaxation in capital requirements relating to nostro investments in insurtech companies and ventures," such that direct equity and debt investment in an insurtech company will be recognized as an investment in infrastructure, which will lead to a reduction in the capital requirements. This would also be allowed in the case of investment via specialist private funds that lead the investment in insurtech companies for the supervised companies. It is also proposed that a relaxation of the capital requirements should be allowed "arising from recognition of development expenses", and likewise to allow classification of investment in insurtech ventures as "a corporation of a different type whose main business is connected to the day to day activity of the insurer" so that "a holding of more than 20% of a particular kind of means of control by an insurer in such a corporation will be allowed." This last proposal will enable insurance companies and other financial institutions to hold more than 20% of the shares in an insurtech company, which is currently not allowed.

In order to make these relaxations possible, the Authority is considering how ventures will become recognized as insurtech ventures for these purposes.

According to the consultation paper released today, the Capital Market, Insurance and Savings Commissioner will approve companies' ventures as insurtech ventures in accordance with criteria set by him or her, among other things according to "the degree of the venture's relevance to the insurance industry, the potential for the venture to bring about technological improvement in insurance companies, how it deals with the risks inherent in technological infrastructure, automation of processes, business innovation, and product development."

Published by Globes, Israel business news - en.globes.co.il - on May 6, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Moshe Bareket Photo: Tamar Matsafi
Moshe Bareket Photo: Tamar Matsafi
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