ISRAEL Insurance Commissioner Dr Moshe Bareket is acting to allow the insurance companies to expand investments in insurtech companies. In a draft policy paper – Investment in Insurtech Companies and in Investment Corporations in the Area of Innovative Financial Technology, Bareket says that as part of the Capital Market Authority’s activity in promoting technological and digital innovation in the areas of activity of the regulated entities, the Authority regards as being of great importance the development and encouragement of ventures in the insurtech sector and also in promoting and developing the investment channels of the financial institutions in the areas of innovative financial technologies.
According to him, this development and encouragement are expected to bring added values to the insurance and financial sectors, increasing competition between them, improving the choice of products and service to the customer, enhancing the interface and feedback in the distribution chain, enhancing the quality of controls and documentation and improving efficiency, as a result of process automation and business innovation.
The Financial Services Control Regulations (Provident Funds) stipulate that an insurer will not control or hold more than 20% of a particular means of control, apart from corporations detailed in the regulations. However, the Authority published a consultative paper on May 6 2019 in the subject of “Easements in Investment in Insurtech Ventures”, with the aim of encouraging insurance companies to invest in ventures in the insurtech sector. Following publication of the consultative paper and approaches on the subject of investment by insurance companies in companies carrying out investments in insurtech ventures, the Commissioner’s position was published on January 13 2020 on “Investment in Insurtech Companies”, setting forth guidelines for granting approval according to Regulation 33(b) of the Rules for Investment in the Control or in Means of Control in Companies as set forth in Regulation 33(b), at a rate exceeding 20%.
The new policy document that has been released aims at encouraging institutions to invest in companies presenting innovative financial technology in areas in which they have higher expertise in the ability to evaluate the potential profitability of the investment, due to proximity to their area of activity. This paper replaces the said Commissioner’s position paper.
The proposed guidelines for holding an insurtech company:
- The insurer will control the insurtech company and will hold at all times at least 51% of all types of means of control, unless otherwise approved by the Commissioner.
- An investment by an institution in an insurtech company will be from the insurer’s nostro funds only.
- The total cost of the overall investment by an insurer in an insurtech company will not exceed the lower of:
- One billion shekels
- 10% of the insurer’s total assets less assets held against yield-dependent obligations.
- The main activity of the insurtech company will be related to the insurer’s regular activity and it will invest in technological or digital activity which is consistent with the insurer’s strategy, including with relation to:
- The potential technological improvement derived from the use of the product or service being developed.
- Coping with the risks entailed in the technological infrastructure.
- Process automation.
- Business innovation and product development.
It is also stipulated that a decrease in the institution’s stake below 51% of the means of control of the insurtech company (including a decrease in the percentage stake blow 20% of the means of control), will be carried out only after receipt in advance of approval by the Commissioner. The insurers are also required to report to the Commissioner annually including a list of its holdings in insurtech companies and their rates, the nature of the activity of the held companies and estimated worth of each of them as of December 31 of the previous year, to be submitted by March 31 of the year following the report year.
(The article Wa4 s First Published On POLICY – The Israel Insurance Newspaper)
MOSHE BAREKET
