Insurers close to blockchain breakthrough
A number of Bermudian-linked companies are supporting a blockchain initiative for the insurance industry that is likely to be market-ready next year.
The Blockchain Insurance Industry Initiative, or B3i, is using blockchain technologies to develop trading platforms that can be used by clients, customers and intermediaries in the insurance and reinsurance space.
It is a collaboration of insurers and reinsurers that formed in 2016 to explore the potential of distributed ledger technologies being used in the insurance industry.
The organisation has been developing and testing a property-casualty smart contract project. The project is now in the proof of concept phase, and the aim is to better serve customers and enhance transaction efficiency.
If all goes to plan, the product will be ready for live trades in the new year. Companies may benefit from cost savings of 30 per cent by using blockchain-based smart contracts.
Explaining how this would be possible, Ken Marke, chief marketing officer of B3i, said: “In the context of reinsurance, typically the counterparties will spend a lot of effort in undertaking reconciliations. A smart contract built on blockchain technology can allow the counterparties to have a single version of the truth which will remove the need for reconciliations because everyone works with the same source of information.
“The smart contract also facilitates real time communication between the parties which obviates the need to e-mail communications and there is a complete audit trail embodies in the blockchain transaction records.”
The prototype smart contract system has been tested by 38 companies, among them insurers, brokers and reinsurers, who simulated reinsurance trades and afterwards gave feedback and suggested enhancements.
Among the members of B3i is XL Catlin and the parent companies of Bermudian-headquartered Tokio Millenium Re and Sompo International. Other members include Hannover Re and Allianz, which both have offices in Bermuda, Liberty Mutual, which owns Ironshore, together with the likes of Swiss Re, Zurich, Munich Re, and Ageas.
Mr Marke said many of the members are also individually experimenting with blockchain technologies. When asked how eager companies are to implement the technologies, he said: “It is clear from the high level of interest in the development of blockchain that companies are eager to get involved with this technology.
“With 38 companies having already been involved in the market testing of our prototype, we have seen an appetite to use the application. The compelling case is the saving generated in the administration of reinsurance transactions which reinforces this interest.”
He said the immediate focus of B3i is on “removing friction from the value chain in the whole market so as to increase efficiency and contribute to making insurance more accessible and affordable around the globe”.
The longer-term vision of the organisation is to develop more innovative business models.
The B3i website is www.b31.tech