News eDaily19 Jun 2017

Singapore:Pilot done on 1st multinational cover using blockchain

19 Jun 2017

American International Group, IBM and Standard Chartered Bank have successfully piloted the first multinational, "smart contract" based insurance policy using blockchain, a distributed ledger technology. The policy covers Singapore, Kenya and the US.

The blockchain solution creates a new level of trust and transparency in the underwriting process, enabling AIG and Standard Chartered to execute multinational coverage more efficiently. Coordinating management and placement of multiple insurance policies across multiple countries is highly complex. The pilot solution was built by IBM and is based on Hyperledger Fabric – a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation.

Working together, AIG, Standard Chartered and IBM converted a multinational, controlled master policy written in the UK, and three local policies in the US, Singapore and Kenya, into a “smart contract” that provides a shared view of policy data and documentation in real-time. This also allows visibility into coverage and premium payment at the local and master level as well as automated notifications to network participants following payment events.

The three jurisdictions were chosen because the US is a large and complex market, Singapore is a growth market for Standard Chartered, and Kenya has a specific regulatory requirement, known as “cash before cover” which means that cover must be paid for before it is valid.

The pilot also demonstrates the ability to include third parties in the network, such as brokers, auditors and other stakeholders, giving them a customised view of policy and payment data and documentation.

The three parties chose to execute this initiative in one of the most complicated areas of commercial insurance – multinational risk transfer – to better understand blockchain’s potential to reduce friction and increase trust in other areas of the insurance value chain.

Mr Rob Schimek, CEO of Commercial, AIG, said: “Our pilot proves blockchain has a powerful role to play in the future of insurance. Any technology, including blockchain, that can increase trust and transparency for an industry whose pillars are built on that, should be fully explored. We’re excited to be delivering innovation that matters to our clients – and co-developing key components of this new technology together.”

Ms Emily Jenner, Head of Insurable Operational Risk at Standard Chartered, said: “As a global bank we have to ensure consistent, trustworthy and secure financial transactions, be that as part of our business or as customers ourselves. By creating a process by which we can arrange multinational insurance contracts through blockchain we not only have transaction security but contract certainty across multiple business locations.”

Ms Marie Wieck, General Manager, IBM Blockchain, said: “There is tremendous opportunity to apply advancements in blockchain technology to transform the insurance industry. By creatively leveraging smart contracts to help address tough regulatory requirements across different markets, we are seeing the enormous impact blockchain can have to improve efficiency and open up new business models.”


 

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