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A chain reaction

How blockchain technology might transform wholesale insurance

Bockchain today
It’s important to recognise that blockchain technologies are already being applied in insurance. For example, in June Allianz unveiled a prototype for using blockchain in the settlement of catastrophe swaps and bonds. XLRAS, meanwhile, is an application from Blem Information Management that helps firms manage their recoveries under ‘excess of loss’ reinsurance. This has recently been enhanced with functionality utilising a blockchain to provide immutable transaction evidence.

Elsewhere, shared workspace provider Vrumi has announced a partnership with blockchain start-up SafeShare to offer Lloyds of London-underwritten insurance products for the hosts that provide office accommodation in its Airbnb-style business3. We’ve also seen Everledger develop blockchain solutions that help the diamond industry – and its insurers – tackle fraud and theft. Moreover, while practical applications of blockchain may not yet be widespread, there is growing awareness of the capabilities of the technology and how these might be of benefit to the insurance industry.

The power of the possible
The potential for blockchain to deliver substantial value to financial services is enormous. For example, a recent report from Goldman Sachs estimates that in banking, consistent use of blockchain in KYC/AML checks alone could save $2.5bn of the estimated $10bn global processing costs in the sector.

Not only does blockchain offer the promise of cost reduction and efficiency, but it could also enable revenue growth, as insurers attract new business through higher-quality service. Relationships with stakeholders, ranging from customers to regulators, will improve as errors are reduced and accuracy improved. It may even be possible to reduce capital requirements as insurers on opposite sides of a transaction proceed to agreement more quickly.

Above all, blockchain technologies can help the wholesale insurance sector fulfil its role in underpinning the global economy more effectively. Just as blockchain is being pursued as a force for positive change in other areas of society – from identification for refugees to better public service delivery – it can also help wholesale insurance to discharge its responsibilities for the common good.

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