New technologies - Blockchain in insurance

The use of blockchain in the insurance sector has not been specifically regulated.

The use of blockchain in the insurance sector has not been specifically regulated.

Although the use of new technologies such as AI, blockchain or APIs is increasingly widespread, there are still no rules approved nor official guidance given by the authorities governing the use of such tools within insurance distribution.

Currently there is no specific insurance regulation relating to the use of blockchain in insurance nor any specific or sectorial code of conduct.

The EIOPA has published a Discussion Paper on Blockchain and Smart Contracts in Insurance. This comprises of a comprehensive guide on how these technologies might be deployed in the insurance sector and the specific and possible adverse effects on consumers.

Additionally, the Discussion Paper sets the ground for harmonising the European Approach to Blockchain and Smart Contracts in the Insurance sector.

There is currently no specific insurance regulation, guidance or code of conduct on blockchain. Therefore, it is necessary to rely on the general regulation.

The application of blockchain technology must be incorporated into existing generic legislation on, for instance, securities law (e.g., Mifid implementation law) and Big Data regulations (e.g., GDPR).

There is currently no specific insurance regulation on blockchain.

On 8 September 2021, the Ukrainian parliament adopted Law of Ukraine “On Virtual Assets”, which aims to regulate all aspects of the circulation of virtual assets in Ukraine and can be viewed as a foundation for further development of blockchain regulations. However, this law will only become effective upon adoption of amendments to the Tax Code, which are not yet in place.

At present, there is no specific insurance regulation relating to the use of blockchain in insurance nor any specific code of conduct.

The UK regulator has recognised the numerous potential benefits of blockchain technologies within the world of financial services but has stressed that it is for firms to determine how these can be adopted compliantly and to make sure the operational risks involved in the use of such technology are properly identified and mitigated.

However, to the extent an insurance product or service involves the use of cryptoassets (which are founded on blockchain technology), it should be noted that the UK regulator has expressed concerns about the potential for cryptoassets to result in consumer harm and has a dedicated Cryptoassets Taskforce. The UK regulator has taken a number of steps to address this, including: (i) publishing guidance within FCA Policy Statement CP19/22 clarifying the categorisation and treatment of cryptoassets within the UK regulatory regime; and (ii) banning the sale to retail clients of derivatives and exchange traded notes which reference certain types of cryptoassets.

The UK regulator is supportive of innovation within financial services and its Innovation Hub offers various services to insurance market participants that are seeking to use blockchain technologies in an innovative manner. This includes access to a “regulatory sandbox” in which new propositions may be tested in a live environment with relaxations to certain rules for a limited time.

There is currently no specific insurance regulation on Blockchain and therefore it is necessary to rely on the general regulation on the subject.

In this regard, its regulation may be found in the following rules:

• Royal Decree-Law 7/2021 on the transposition of European Union directives in the areas of competition, prevention of money laundering, credit institutions, telecommunications, tax measures, prevention and repair of environmental damage, posting of workers in the provision of transnational services and consumer protection;
• Law 11/2021 on measures to prevent and combat tax fraud, transposing Council Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market, amending various tax rules and on the regulation of gambling;
• Royal Legislative Decree 4/2015, approving the consolidated text of the Securities Market Law.