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Blockchain is predicted by some to become the fifth major wave in computing – after mainframes, personal computers, the internet and social networks. And there has been much hype about its potential use in insurance. Hélène Stanway, Digital Leader at XL Catlin, discusses how Blockchain can help risk managers to do their jobs and how it can be used to help make global programmes more efficient.

Q. What are the potential uses for Blockchain in insurance?

A. Blockchain offers a secure, decentralised and distributed ledger, housed on a secure platform. It is able to give real-time information on risk, exposures and claims. By automating some processes in the risk transfer and insurance transaction, Blockchain can not only speed things up and remove discrepancies, it can free up all parties in the chain to focus on the more pertinent and higher-value elements of the process. Blockchain will, we believe, enable a more collaborative approach to underwriting risk.

Q. How are insurers using Blockchain to benefit their clients?

A. Insurers are beginning to explore ways in which Blockchain can be used across different lines of insurance. There are many examples of insurers exploring the ways in which this technology can be harnessed to streamline the insurance process in order to be able to direct resources, time and energy to the more complex areas of the risk management process where human expertise is key. We have a Blockchain platform that we have collaborated on with several partners, in marine insurance. We undertook a proof of concept to test whether a Blockchain-enabled platform would be viable in this sector – which is one of the most complex and international segments of the insurance industry. The proof of concept focused mainly on collecting and maintaining data about assets that could then be shared between the various parties in the risk transfer process. We were pleased to find, during this proof of concept exercise, that using Blockchain technology improved transparency, reduced costs and fostered collaboration.. XL Catlin is also a member of the B3i - the Blockchain Insurance Industry Initiative – which is working to develop a joint-distributed ledger for reinsurance transactions driven by blockchain technology.

Q. Will Blockchain be used for global programmes and how will it improve the process?

A. Blockchain technology will certainly be of use in global programme structures. For example, we are working with one client that hopes to use Blockchain to streamline elements of its global property programme. The idea is that the premium allocation process will be simplified by capturing all the relevant data on asset values and loss histories, across all of the countries covered by the programme, in one distributed ledger. This would free up the risk manager from this time-consuming, and tedious, process. Insurers also are exploring the use of smart contracts to transfer funds between stakeholders. Smart contracts essentially are protocols that facilitate contracts and, for example, enable transactions to take place without the involvement of a third party. Smart contracts could, for example, be used to move money between a captive and a parent company, to issue certificates of insurance within a global programme, and to make claims payments, among other things.

Q. Are there other areas of technology that will change the way risk is managed and transferred?

A. As well as Blockchain technology, the use of artificial intelligence is set to transform the risk management process. AI has the power to access new types of data, and combine different types of data, and analyse far more quickly than a human ever could. Using AI, therefore, throws up some fascinating risk trend information, and this will really help risk managers to focus on the areas that they need to target and help them prioritise risk areas. The Internet of Things, and increased use of sensors, also help bring powerful new insights – by combining new data sources with existing ones we can gain more knowledge about risk. The insurance and risk management industry will always be a people business, but using technology to give us intelligence that we could not otherwise access will, we believe, really help risk managers and their insurers in the future.

Hélène Stanway is Digital Leader at XL Catlin and can be reached at Helene.Stanway@xlcatlin.com.

This article first appeared in International Programme News.

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