Re-Insurance

Demonstration of the future of insurance

  • Digital advancement: an audience was given a real-time demonstration by ChainThat of how the Bermuda Insurance Exchange works. A production trial with up to 20 participants is due to start in July (Photograph by Scott Neil)

The creation of the Bermuda Insurance Exchange is an example of the rapidly changing digital landscape, and transformations in how businesses and customers interact.

“What we are seeing with insurance and other industries, is that we are going through a digital transformation. Blockchain is just one of the components of it. We are starting to see IoT [Internet of Things] and telematics on top of our platform also,” said Ryan Rugg, global head of insurance at R3 Corda.

She was a speaker at the unveiling of ChainThat’s insurance exchange, which has been described as the industry’s first distributed-ledger technology risk and capital exchange.

ChainThat is using the R3 Corda platform for the exchange. A demonstration was given to about 80 businesspeople at the Hamilton Princess and Beach Club last Tuesday.

Ms Rugg said the reason for the wider digital transformation of businesses is the changing expectations and preferences of buyers. She said: “Look at the news today, we saw the Uber and Lyft started their own insurance company. You are seeing millennials who don’t want to buy insurance the same way they used to.

“So, why now is this going to work? Because the economy has changed.”

Two years ago, Ms Rugg and R3 launched the Centre of Excellence for Insurers and Reinsurers, in partnership with the Association of Cooperative Operations Research and Development. The centre harnesses the power of collaborative networks through digital ledger technology with the financial service industry.

She highlighted the importance for a distributed ledger having interoperability with banks, exchanges and other entities.

At the Bermuda Insurance Exchange demonstration event, David Edwards, chief executive officer of ChainThat, led a real-time trial of how the exchange works. Three clients were created, one a cedant, one a broker, and the other a reinsurer.

On large screens, the audience was shown the process of submitting a request for a reinsurance contract, with messages sent back and forth as information was shared, terms and quotes submitted, a selection made, and the transaction completed.

When changes were made to the data and contract, these were reflected instantly on each participants’ screen, enabling them to be aware of where things stood in the process.

In the background, an audit history was being created on a blockchain to record the various stages the transaction.

A second user-case example was demonstrated that showed how a claim could be processed on the exchange.

Mr Edwards said that by using digital ledger technology, processes could be streamlined and expense ratios reduced.

“Our plan here is not to change the world and business models today, [but] let’s support the existing models — the way reinsurance works,” he said.

The demonstration was an example of a reinsurance deal, however, it is intended that the exchange will also encompass the likes of insurance-linked securities and industry loss warranties in future stages.

ChainThat is headquartered in London. It is backed by Bermudian-registered consulting and managed services company Xceedance, with which it works strategically and operationally.

It is setting up a steering committee for the Bermuda Insurance Exchange, and user groups of up to 20 companies to take part in a six-month production trial, starting in July.

Mr Edwards said: “ChainThat isn’t here to run the network. It needs to be Bermuda that is governing this. In terms of the trial, we are looking at a light-touch governance.”

He said if it wasn’t right for Bermuda, it would be better to fail fast and not invest too much time and effort. However, he added: “We are confident that it is right.

“We are going to set up the trial governance, the Bermuda steering committee, the people who want to drive Bermuda forward, drive this type of market solution forward. That will be done with ChainThat partners, participants, and regulators.

“We are looking for people who trade together, or want new trade, to start to work together on this. It will all be out of Bermuda.”

Explaining why it was being done in Bermuda, rather than elsewhere, he said: “This has been a great experience for the last six months; actually meeting people in Bermuda, expressing what we are trying to do, starting off as a trading platform, evolving into a risk exchange.

“London is lots of committees and everything is very slow. The fact is, people here work together, they see people at weekends, everyone gets on. It is just a different environment. The way the Government is trying to bring fintech, insurtech, and blockchain to the island — it is the ideal place where we can actually achieve something.”

ChainThat intends to meet with participants for the production trial later this month.

ChainThat has a website at https://www.chainthat.com/