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EY (London) and Guardtime (Amsterdam) have developed what the firms characterize as the world’s first blockchain platform for marine insurance. Designed for use globally, the platform debuts after a 20-week proof of concept, and was developed in collaboration with ACORD, A.P. Møller-Maersk A/S, Microsoft, MS Amlin, Willis Towers Watson and XL Catlin.
“We are excited to collaborate with EY on this innovative blockchain solution for the insurance industry,” comments Bill Pieroni, President and CEO, ACORD, the global insurance industry’s data standards and technology organization. “This first-of-a-kind effort has the potential to dramatically reduce time, cost and risk across the entire insurance value chain. ACORD looks forward to working together to help our members realize the benefits associated with blockchain.”
EY reports that the new platform was built on Microsoft Azure global cloud technology and is planned to be implemented beginning in 2018. The platform’s initial phased rollout will involve deploying the benefits of blockchain for end-to-end use across the marine industry. The platform connects clients, brokers, insurers and third parties to distributed common ledgers that capture data about identities, risk and exposures, and integrates this information with insurance contracts. Its capabilities include the following, according to an EY statement:
- the ability to create and maintain asset data from multiple parties;
- to link data to policy contracts;
- to receive and act upon information that results in a pricing or a business process change;
- to connect client assets, transactions and payments; and
- to capture and validate up-to-date first notification or loss data.
“Blockchain’s potential to transform the insurance ecosystem has always been clear; what we have done is to move forward from potential to reality,” comments Shaun Crawford, EY Global Insurance Leader. “This solution is the first to apply blockchain’s transparency, security and standardization to marine insurance and is ready for commercial use.”
Any insurance transactions involving multiple parties coordinating on complex contracts presents an opportunity for the successful use of blockchain technology, suggests Mark Breading, a partner at research and advisory firm SMA (Boston). “The distributed ledger technology provides the security and collaboration capabilities that make these types of transactions more efficient,” Breading observes. “In this case, you only need look at the long list of parties collaborating on the platform to understand why it is a good application for blockchain.”
“We started this work in 2016 with an intuitive belief that blockchain technology could transform the marine insurance market,” comments Paul Taffinder, Director of Strategy and Innovation, at specialty insurer and reinsurer MS Amlin (London). “We are excited that we are already in a position to test a practical platform though which we will be transacting business in a completely new way. It’s part of our MS Amlin EDGE program to seize advantage through tactical and more radical opportunities for digital disruption and business model innovation.”
Critical for the Evolution of the Insurance Industry
Participants in the initiative emphasize the potential of blockchain to significantly improve the efficiency of complex, multiparty commercial insurance transactions.
“Redesigning the insurance process is critical for the evolution of our industry,” comments Simon Gaffney, Chief Data Officer, Willis Towers Watson (London). This initiative has the potential to streamline and simplify insurance transaction efficiency using new technologies, an essential development for the insurance industry.”
Martin Henley, CIO, XL Catlin (Hamilton, Bermuda), calls the successful 20-week proof of concept “ground breaking.” “While the insurance industry has been looking at blockchain as a way to disrupt some of its processes and become more efficient, this will lead to ‘real-life’ innovations,” he asserts. “We will learn from those and apply them to other insurance segments—and ultimately better delivery for our clients across the industry.”
EY’s Crawford affirmed his company’s intention to apply the learning of the marine blockchain platform to other lines of business. “We look forward to deploying this technology across the marine insurance industry and are exploring how these findings and insights will be applied to other specialty insurance markets and beyond,” he says.
Guardtime CEO Mike Gault characterizes his firm’s KSI blockchain stack as a proven technology for securing the physical, software and information supply chains that enterprises rely on for the integrity of their businesses. “We are thrilled to be collaborating with EY to expand the number of real-world customer problems solved with our technology,” Gault comments. “Guardtime’s technology and deep domain knowledge from EY represents a formidable combination for customers looking to solve hard problems with blockchain technology.”
Blockchain as a Standard Part of the Insurance Technology Fabric
The EY/Guardtime platform is a departure from previous efforts at adapting blockchain for the insurance industry, which have tended to be about consortiums and councils rather than actual blockchain implementations, notes Jeffrey Goldberg, Senior VP at research and advisory firm Novarica. “This is because the platform is, in part, a distributed ledger that enforces trusted and transparent exchanges between multiple invested parties, and that means the first step is often determining how those multiple parties will work together,” he says. “With the complex interactions and international relationships required in the marine insurance space, blockchain technology does have appear to have a natural fit and it’s good to see an active project moving forward. But like any exchange or centralized platform it will require both the technology and the adoption by invested partners.”
The capacity of the technology isn’t likely to be an impediment to the success of this or any other blockchain platform, suggests SMA’s Breading. The likely cause of the failure of such a platform would be entrenched behaviors and politics rather than technology, he opines. “I expect other platforms to be developed for various types of commercial risk placement—especially those where there may be multiple primary carriers, reinsurers, and even retrocessionairres taking slices of the exposure,” he adds. “Beyond that, there are use cases for blockchain across the value chain and for every insurance line of business. It won’t happen right away but eventually I expect blockchain to be a standard part of the technology fabric for insurers.”