The industry’s blockchain project, B3i, has ceased operations and filed for bankruptcy after failed funding rounds.
“The directors, after consultation with the shareholders, jointly concluded that there was insufficient support at this stage to continue the business,” according to an announcement on the company’s website.
“I think it was a very qualitative effort, but in the end we didn’t see the volumes in demand” that would have justified further investments in this platform, according to John Dacey, group CFO for Swiss Re, which was an original investor in the B3i -initiative.
“Conceptually, I think it remains a very interesting opportunity for the industry. It could be that at some point someone will break the code, but right now with this platform, it didn’t look like it was going to move forward in a profitable way,” Dacey said during a Swiss Re media call to discuss the results of the first half of the reinsurer.
B3i, which stands for The Blockchain Insurance Industry Initiative, started when five insurers and reinsurers came together in 2016 to explore the potential use of distributed ledger technology, known informally as blockchain.
The original consortium consisted of five insurers: Aegon, Allianz, Munich Re, Swiss RE and Zurich, with a further 10 companies joining in 2017: Achmea, Ageas, Generali, Hannover Re, Liberty Mutual, SCOR, Sompo, RGA, Tokio Marine and XL Catlin (now AXA XL). Willis Towers Watson was also a member of the strategic advisory board.
In 2018, B3i founded a company called B3i Services AG in Zurich, which was supported by 20 major reinsurers by 2020.
During the Swiss Re media briefing, Group CEO Christian Mumenthaler speculated on one way blockchain could be successful.
“We need an end-to-end view,” he said. “It would need all insurance companies to basically create smart contracts at the beginning, at the origin.”
And then a digital reinsurance contract could be created afterwards, creating complete end-to-end efficiency, Mumenthaler added.
The problem, he noted, is that all insurers would have to change their IT systems to create smart contracts.
B3i tried to improve the interface between insurance companies and reinsurers, but not against the original risk, allowing for end-to-end contracts.
“You just don’t achieve the efficiency you need if you start with that,” Mumenthaler said.
Insurers and reinsurers investing in B3i had hoped that blockchain technology used in insurance transactions would help reduce costs and contract uncertainties. An oft-cited example was the case of the September 11 terrorist attacks. Coverage for the World Trade Center had just been agreed, but the paperwork was still unfinished when the planes hit the towers. Years of legal proceedings followed.
If blockchain solutions had been available and policies had been implemented in one common, underlying ledger where adoption by both parties could have been verified, the lengthy legal wrangling could have been avoided – or so the working theory was.
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