In order to conduct financial activities (e.g. sell products), a business must be authorised and regulated by their local regulator. This includes insurance companies and intermediaries as well as banks and credit unions.

• In the UK you need to be authorised by the Financial Conduct Authority (FCA).
• In Australia you need authorisations from the Australian Securities & Investment Commission (ASIC).
• In the USA you need to be authorised within each respective state.
• In the EU once you have authorisation in one country, you can benefit from the passporting regime with other EU countries.

Firms are required to be authorised and comply with rules set out by their local regulator in order to make sure that they are meeting a minimum standard. Businesses are required to do this at all times and must regularly report to their local regulator.

To become authorised a business must apply to their local regulator (e.g. FCA in the UK). The process can take from 6-12 months and you must meet the threshold criteria.

An authorised business (the Principal), can assume the regulatory responsibility for another which sells its products (the Appointed Representative). An AR can perform regulated activities (such as distributing insurance products) but only under the control of the Principal which oversees the sales process, documentation, customer servicing and compliance framework.

An Appointed Representative (AR) is a firm or person who runs regulated activities and acts as an agent for a firm the local regulator directly authorises. This firm is known as the AR’s ‘Principal’. The Principal will manage your compliance and operating requirements to the local regulator.

Becoming directly authorised by the local regulator provides you more internal control over your business, but this comes with the full responsibility for trading within the local regulator’s requirements, including reporting to the regulator.

Capacity is an insurance term for the financial resources made available by an insurance company to enable it to accept risks. Insurers must be able to pay claims and have to work out how many claims of what types can be afforded against these resources.

Underwriting is the process insurers go through to assess risks and calculate the price such that sufficient capacity is retained to pay the claims and make a profit.

To sell insurance products you must be either a) be authorised by your local regulator as an ‘insurer’, or b) act as ‘insurance intermediary’ in partnership with an insurer.

To become an insurer requires significant solvency capital requirements, hence today we typically see an Insurtech becoming an insurance intermediary and partnering with an incumbent insurer. As part of this partnership, the insurer provides the Insurtech with ‘authorised capital’, and i.e. underwrites the startup’s insurance product.

Authorised capital is separated from a startup’s ‘working capital’ (day-to-day business cash flow) and can only be used to sell insurance products against. It is leveraged to payout on customer’s claims, and depending on the amount, limits the amount of insurance a startup can sell.

An insurance partner is critical to sell insurance products as they provide the security that claims will be paid. Further, the insurer can provide benefits such as: ratings tables, policy wording, IT support, product design and years of experience operating in the sector. It is in their interest to ensure their partner startup is successful, so that their capacity is put to efficient use.

Reinsurers provide financial security for insurance companies by taking on risks that are too large for one insurer to handle, or to help share the risk with other insurers, easing the load on each. This allows insurance companies to hold less capital as they have less potential losses to cover, in addition it allows them to underwrite more policies. Reinsurers can also provide expertise in some specialist markets.

An insurer sells insurance to a customer otherwise known as the insured or a policyholder. Insurance is the exchange of payment for the risk of a loss. In exchange for payment insureds are guaranteed a promise of compensation should a loss occur.

For example, many people have home insurance, customers pay a monthly fee to their insurer, safe in the knowledge that should their house be damaged in a storm their insurer will provide funds to cover repairs (NB this would depend on the type of policy that the policyholder had taken out).

A reinsurer does not sell insurance policies to consumers. Reinsurance is a type of insurance that is often purchased by one or more insurance companies who are looking to limit their total loss should a disaster or catastrophe occur. In short, it’s insurance for insurance companies.

For example a group of insurers who sell flood insurance to house owners in just one city could find their business destroyed if the ice caps melted overnight and flooded that city. Instead of leaving themselves liable the group of companies can purchase reinsurance so that if the flood occurred they are only liable to compensate for a fraction of the losses and the reinsurers cover the rest.

Insurtech Gateway offers a shortlist of exclusive commercial deals with best-in-class build partners. We have assessed the full stack of an Insurtech business needs, from ‘front office’ (brand, design, PR), to ‘middle office’ (customer support, claims, business services) and ‘back office’ (IT stack) to provide a recommended partner list. Our platform is not mandatory, and startups can pick and mix the services their business requires. Our platform increases speed to market, saves the management time and money and ensures all products are scalable.

Robert Lumley and Stephen Brittain Co-Founded the Insurtech Gateway, the World’s first FCA authorised incubator in 2016 with the intention of attracting real problem solvers from outside of the market to test and pilot new thinking.

They believe that Unicorns are built, not discovered. And for success adaptable founding teams need to work collaboratively with a group of very diverse stakeholders.

‘We love coming to work every day. There are so many breakthroughs in this emerging sector.’ – Robert.

6 years on the Gateway has incubators in London and Sydney, and 2 Seed Funds. Their 24 portfolio companies, live in 37 countries, are testimony to creative thinking, breakthrough technologies and what can be achieved by entrepreneurs in a supportive innovation environment.

Our incubator in Australia has gathered a team of industry professionals to help mentor, provide advice and connections.

Meet the mentors.

Our European Incubator is in London: Working From – Southwark, 32 Blackfriars Road, SE1 8PB

Our Australian Incubator has an office in Sydney: Level 5, 11 York Street, NSW 2000 and Brisbane: 9/35 Paringa Road, Murarrie, QLD 4172

A pitch deck and business plan is helpful but we invest in exceptional founders from the earliest possible stage…so don’t be afraid to reach out if all you have is an idea!