Insureblocks is a dedicated weekly podcast on blockchain, smart contracts and distributed ledger technology (DLT) in the insurance industry. Hosted by Walid Al Saqqaf, this podcast will invite expert speakers from incumbents to the most promising start-ups in London, New York, Zurich and around the world. Insureblocks is the best way to not only understand the basics of blockchain but to also hear about proof of concepts, what insurance companies have done, their learnings and the end results. Whether you are new to or an expert on blockchain and would like to understand the impact it will have on the insurance industry, this is the podcast you'll want to tune into.
Ep.19 – Insurwave: the insurer’s perspective with MS Amlin and XL Catlin
Insurwave, the new marine insurance blockchain platform launched by EY, Guardtime, Microsoft, Willis Tower Watson, XL Catlin, MS Amlin and ACORD and piloted by Maersk has been a recurring theme here at Insureblocks.
In a previous episode, Insurwave - a Maersk pilot for marine blockchain insurance, we examined the client’s perspective. In a more recent episode, Insurwave: the complete story with EY, we discussed the process of creating Insurwave. To complete the circle, today we will look at Insurwave from an insurer’s perspective.
For today’s episode we were lucky enough to have two speakers, Madeline Bailey, Head of Strategic Initiatives at MS Amlin, and Hélène Stanway, Digital Leader at XL Catlin.
Blockchain in two minutes
Blockchain is a distributed ledger that allows users to share data in real time in a secure and immutable way. This data can be related to assets, for example the location of a vessel, or it can be a smart contract, a piece of code set to execute when a set of specified parameters is fulfilled.
Blockchain has the potential to create trust between parties in the insurance industry and improve risk intelligence, lowering costs and benefiting parties across the insurance value chain.
In the past four years the marine insurance industry has experienced declining performance and increasing combined operating ratios. It has become necessary, therefore, to take a strategic look at the industry and consider how new technologies can improve efficiency. In building Insurwave, both MS Amlin and XL Catlin were willing to take a leadership position in the insurance industry and commit to a vision of how the industry is going to develop.
In an industry not known for embracing change, developing Insurwave came with challenges. Working alongside competitors and completely re-inventing the underwriting process is not something insurance companies have done before. However, every participant was keen to grasp an opportunity to cooperate with representatives across the value chain and consider what each needs out of an insurance transaction to re-imagine the underwriting process.
The low margins plaguing the insurance industry posed an additional challenge. Unlike usual, well defined projects, it is harder to quantify the costs and benefits of investing in innovation. For that reason it was important to have a clear set of goals with Insurwave. One of the main factors Insurwave has been successful is its focus on providing hull and war cover for its pilot with Maersk.
Insurwave allows parties to seamlessly share data between them. By combining blockchain with IoT data, parties have access to real time information. At the moment Insurwave provides over thirty data points per vessel. The aim is to get to fifty. Insurers get more data, get data of different types and get it in real time.
Up until now, insurers traditionally looked backwards to quantify risk. This means the insurance industry has yet to come up with a definitive answer on how to use all this new data but Insurwave opens up a range of new possibilities.
Ep. 164 – Tokenisation of Assets and Potential Implications for Financial Markets – OECD Report
Asset tokenisation has become one of the most prominent use-cases of distributed ledger technologies (DLTs) in financial markets, for assets including securities, commodities and other non-financial assets. For this podcast we had Iota Nassr, Economist and Policy Analyst at the OECD, join us to discuss her recent OECD report on the tokenisation of assets and their potential implications for financial markets.
Iota started working as an investment banker at Merrill Lynch and at Citigroup before joining the OECD for the last 9 years working for the committee on financial markets. The committee has set up an expert group on financial digitalisation which includes representatives of central banks, finance ministries, treasuries and other financial authorities from the 38 OECD members. The group looks into Fintech related matters in financial markets and their policy implications including the area of blockchain in finance.
What is blockchain?
Blockchain is a type of distributed ledger technology, that records information in a distributed manner, in an immutable, time stamped and programmable manner that allows for the exchange of value without the need for a trusted central authority or without the need of intermediaries.
This allows for efficiency gains on the back of such disintermediation.
Tokenisation of assets and potential implications for financial markets – OECD report
On the 17th of January 2020, the OECD published the “Tokenisation of assets and potential implications for financial markets” report.
Since 2018, the OECD committee on financial markets had been working on blockchain related issues. What kicked it off was the ICO (initial coin offering) hype, which the OECD looked at for their potential for SME financing in a report entitled “Initial Coin Offerings (ICOs) for SME Financing ”. With the drop in ICO hype the committee continued to have an interest on the potential of tokens and tokenised markets post ICO, particularly on their potential proliferation in the technique of tokenisation would affect traditional financial markets.
What they were really looking at is a theoretical environment where tokenized assets and market for tokenized assets take off. If that were to happen, how would it affect financial markets? And what do policymakers need to know and think ahead of that? That was the initial objective of the tokenisation of assets report they published in January 2020.
What is tokenisation of assets?
The report looks at tokens from two perspective: (1) tokens representing a pre-existing real asset and (2) tokens “native” to the blockchain.
The firsts case has tokenisation as the process of representing in a digital way by using the DLT an asset that already pre-exists. The tokens exist on the chain and carry the rights of the assets that they represent. They effectively act as a store of value for something that exists in the physical world.
In the second case, we have native tokens which are built directly on the chain and live exclusively on the distributed ledger. Cryptocurrencies like Bitcoin or payment tokens are examples of native tokens which derive their value in of themselves and are defined by their existence on the blockchain.
The difference between the two is that in the first case the real assets on the back of which tokens are issued, continue to exist in the off-chain world. In the case of physical real assets,
Ep. 163 – Enabling an open mobility ecosystem – Insights from bloXmove
Harry Behrens – bloXmove co-founder. Harry was until recently the Head of the Daimler Mobility Blockchain Factory where they built a mobility blockchain platform. Harry describes himself as a software guy. Now, along with his co-founder Sophia Rodiger, he has performed a management buyout of the Daimler Mobility Blockchain Platform which is the core of what bloXmove will be bringing to the market. In this podcast we discuss how bloXmove will enable building an open mobility ecosystem.
What is blockchain?
Harry defines distributed ledger technology (DLT) as way for independent parties to keep a shared set of truthful facts of transactions they conduct amongst each other. It is a peer to peer system that facilitates trusted transactions between trustless parties, where they can trust the distributed ledger to reflect the reality of the business relationships between them.
From Daimler Mobility Blockchain to bloxMove
One of the many uniqueness of this startup is that of the four founders, two of them are women with the CEO being a woman named Sophia Rodiger, who also comes from the Daimler Mobility Blockchain Platform.
The Daimler Mobility Blockchain Platform is a blockchain project at Daimler Mobility AG whose aim is to sustainably optimize booking and invoicing processes for mobility solutions.
Non-native electric automakers, where native electric being Tesla for example, are facing serious transformations, in additions to the challenges of COVID19. Daimler for example is doing a form of demerger of all its entities where the truck unit is being separated from the passenger car unit and its financial arm is being split into two. In such times Daimler, like any other business, needs to focus on its core business. Thus, no matter how promising the mobility blockchain platform could be for Daimler or Daimler mobility it isn’t core business.
The platform was production ready and was ready to be “unleashed” as Harry describes it. However, as the platform was built for ecosystem, he believes that any big player with a very strong brand name will never be able to build an ecosystem because it won’t be able to attract the other brands to its ecosystem. For example, Daimler wouldn’t be able to attract Toyota, BMW or Tesla to join the Daimler Mobility Blockchain Platform.
Thus, the only way to do a platform game, to go into platform economics based on software can only be done via a perceived neutral entity. A platform branded as the Daimler Mobility Blockchain Platform will never be able to become the platform for shared mobility or urban mobility.
It was thus agreed that Sophia and Harry will perform a management buyout of the Daimler Mobility Blockchain Platform via bloXmove with the help of venture capital funding from players such as Outlier Ventures.
“By granting the software license, we want to make it possible for the platform to be used for other areas of application and thus to reach its full potential. I am very pleased that our successful pilot project is now being continued and further developed at bloXmove,” says Carmen Roth-Schäfer, CTO Daimler Mobility AG.
BloXmove being this independent third party is now able to ...
Ep. 162 – Komgo – rethinking blockchain in trade finance
Souleima Baddi is the CEO of Komgo, an innovative platform that powers trade networks. In this podcast we discussed the challenges of bringing blockchain to the trade finance industry. Souleima shared her insights on how to manage the need to bring user value immediately whilst dealing with both tech and user issues for adopting blockchain. How do you manage IT and security departments conventional ways of vetting a new platform whilst gaining the trust of traders accustomed to using email and paper processes for the last decades?
Souleima is a banker, having spent 18 years with Société Générale, of which the last 10 years were in Geneva launching their commodity finance business. She’s also a passionate mum of three kids.
What is blockchain?
Blockchain is a distributed ledger. It is a shared and synchronised database across multiple participants, that enables the recording of interactions and transfer of information, such as identity or values like money and securities, between two parties without the need for a centrally coordinating entity.
Komgo uses DLT to create a digital audit trail of documents which strongly mitigates the risk of hampering the document or using the document multiple times for fraudulent purposes.
Trade finance industry challenges
One of the main challenges of this industry has been its usage of paper based process for such a long time.
There has been an acceleration of digital transformation that has increased due to COVID. However, transforming an industry does take a lot of time. Individuals are not easily willing to change their way of working, their routines, to invest in change management and put extra effort to adopt new processes.
Komgo has more than 150 companies using its platform on a worldwide basis. Souleima recognises that for companies using any new software is a huge investment in terms of time and energy before it brings added value to the company. Teams within companies are swamped with their everyday job with their execution and it is extremely challenging for them, despite their goodwill, to embrace digitisation on top of everything else.
The good news is that the trade finance industry recognises that digitisation is an absolute must and that it will play a major role in the future of the industry. The players who move too slowly in embracing digitisation will lose their competitive edge to others who are faster at it.
Komgo is an industry initiative with 20 shareholders from corporates and financial institutions who have merged forces to build a solution that matches the needs of the industry from both sides. Komgo is a software development company incorporated in Geneva in 2018 whose vision is to bring workings solutions to clients that helps them execute more trades, faster and in a more secure manner.
Komgo, offers fours solutions to the market:
* Konsole: streamline trade finance – structured and authenticated messaging to issue secure banking instructions
* Market: optimize liquidity & manage risk – harmonized data and transactions to enable better choices
* Check: simplify onboarding & renewal – a single source to accelerate KYC
* Trakk: keep track of document trails – build unique documentary audit trails to guard against fraud and falsification
Konsole allows banks and corporates to connect together in an authenticated structured exchange around the full lifecycle of trade finance instruments. Souleima provided an example where corporates can discuss between them and agree on the draft of a letter of cred...
Ep. 161 – ClaimShare a use case in confidential computing
Chaim Finizola is the ClaimShare Director and the head of business development for emerging markets over at IntellectEU. In this podcast we discuss ClaimShare’s confidential computing solution built on top of R3’s Conclave and Corda Enterprise platform for the detection and prevention of “double dipping” fraud in the insurance industry which runs in the several billions of dollars each year.
What is blockchain?
Blockchain is a technology that allows different actors to collaborate with each other without having to trust each other. Having a database in the form of a distributed ledger you can have not only the data decentralised, but also the way the data is handled in a decentralised manner.
Independent of the discussion of centralised versus decentralised, Chaim reminds us what is important is to focus on the business use case and then determine the best approach.
What is confidential computing
Confidential computing allows different actors to perform private computations on specific data sets and process data without other actors being aware of each other and without them being able to see what data is being processed.
The party that is hosting this black box whether it’s a regulator or a network operator they can’t see what is being processed within the black box.
An example of such a black box is the Intel SGX chip which has enclaves where the data can be processed in a fully confidential way without revealing any data to external parties.
Insurblocks recorded a podcast with Richard Brown, CTO at R3 entitled "Confidential computing - introduction to R3's Conclave".
“Double Dipping” Fraud
KPMG has estimated that detected and undetected fraud make up between 5% to 10% of insurers’ total claim payouts. “Double-dipping” fraud a key contributor to fraud, costs the insurance industry several billion dollars each year, which inevitably leads to higher household insurance costs
Double dipping happens when one actor for one loss event goes to multiple insurers to request a same payout. For example, a customer whose had a car accident will go to insurers A, B and C to get a payout from each one of them. This is quite a large problem for insurers which today has been extremely hard to detect. Insurers are usually unaware of this problem as they do not have a way to detect if their customer are insured with another insurer and if a payout has been made on a claim or not.
There has been attempts by insurers to share information via a centralised database but that came up with a number of complexities from a regulatory standpoint and from a GDPR one. In addition, centralised databases run the risk of getting hacked or of leaked sensitive information.
IntellectEU are the developers of the ClaimShare solution. The firm was founded over 15 years ago as an integration company in the payment sector. They have done over 400 integrations, mainly with SWIFT, in addition to other payment rails.
Ep. 160 – NFTs an opportunity for the financial industry?
Charles Kerrigan – Partner & Global Head of Fintech at CMS. Charles spends his time looking at what do new technologies mean for the industries that their clients work in from financial institutions to fintechs, crypto firms, and blockchain protocols. In this podcast we take a comprehensive look at NFTs and their impact on the financial industry, on property, transferability and ownership within legal frameworks.
What is blockchain?
Charles gives us a lawyer’s definition, where he sees blockchain as both a puzzle and a challenge. To explain that he gave us an example, where is cryptocurrency property as defined under a legal system in English law. Property can be categorised into two buckets:
* Real property, is tangible and is something that can be touched.
* Intangible property: Shows in action, is essentially everything else where you can bring an action in relation to it, i.e. that you can sue in court for it.
When Bitcoin arrived, it wasn’t something that can be touched and thus could be considered as an intangible property. However intangible property has been defined over the centuries as something that you can sue under a contract. Bitcoin thus isn’t either an intangible property nor a tangible one.
The theft legislation talks about depriving someone of property, so bitcoins not property, you can't steal it.
In November 2019 Sir Geoffrey Vos, Chancellor of the High Court came to the conclusion. That crypto-assets have all the legal indicia of property and are, as a matter of English legal principle to be treated as property. There are two primary reasons:
* First, the novel features of some crypto-assets, such as intangibility, cryptographic authentication, use of a distributed transaction ledger, decentralisation, and rule by consensus, do not disqualify them from being property.
* Secondly, they are not disqualified from being property either because they can be regarded as pure information, or because it might not be possible to classify them as being things in possession or things in action
Taking the above points into consideration for defining blockchain, Charles explains that blockchain identifies value, it establishes certainty of ownership and is able to transfer value with certainty.
NFTs – Non Fungible Tokens
NFTs provide the opportunity to identify ownership in a digital context and that has value in itself.
A lot of present and historical legal disputes around commercial law are with regard to disputes over ownership. A person acquires a piece of property from another person, not through a valid transfer, whether it's via theft or mistake, or anything, that means that Person A has lost an asset, Person B has gained an asset in a way that's invalid. So far, we've got an easy case, because Person B should give it back to Person A.
The hard cases come from variations of when Person B, hands it on to person C in exchange for some value. So now you've got A out of pocket, and C out of pocket, and B disappears whether physically or financially where they become insolvent. We've now got a dispute between A and C, neither of whom are at fault. But both of whom are arguing that they should have this asset returned to them.
NFTs provide an immutable, searchable register in terms of who is the owner of a piece of property.
Because NFTs are sitting on their own blockchain protocol such as Ethereum, they transfer their rights of ownership via an executable code. Two questions arise with regards what is being transferred:
Breath of fresh air
Walid is knowledgeable and gives good insight into a new and promising technology. For anyone who is interested in the insurance industry and is looking for good content then this podcast is for you.
Great podcast series with really interesting people, subject matter experts and influencers. Good quality recording and relaxed delivery. The diversity episode was one of my favourites. Highly recommend it
Always insightful, realistic and pitched at the right level for all to understand.