One way to enter the insurtech space as a risk-taker is by forming an insurance carrier.

Advantages:

• Controlling the formation of the insurance carrier, from the beginning.
• The guarantee that, being newly formed, the insurance carrier has no hidden risks.

Disadvantages:

• Significant setup costs.
• Seasoning requirements need to be considered for expansion.

Key considerations:

• A comparison of the methods for establishing an insurance carrier (formation vs. acquisition) can be found here: “Insurance Carrier.”

Application Process:

Typically, the process of forming an insurance carrier in the United States requires submitting a UCAA Primary Application to the insurance carrier’s proposed domiciliary state. Key components of the application are:

• A business plan (including financial projections) and Questionnaire (Form 8), which provide a description of the insurance carrier’s planned operations.
• Biographical affidavits for the proposed directors, executive officers and any other “controlling” persons of the insurance carrier and background checks, which are typically required for all individuals for whom biographical affidavits are provided.
• In some states, fingerprint cards (as part of the background check process).
• The new insurance carrier’s proposed organizational documents (typically, articles of incorporation and, sometimes, by-laws).

In addition, if any intercompany agreements are proposed to be in place between the insurance carrier and its affiliates as of the date on which it obtains its domiciliary state license, these agreements should typically be submitted for prior approval as part of, or on a parallel track to, the UCAA Primary Application.

Coordination with Other US Governmental Authorities: In some states, the process of forming an insurance carrier also requires coordination and filings with the state’s Secretary of State, and, in a few states, the state’s Attorney General.