Allianz trials blockchain prototype for the captive insurance market

International insurance transactions can be significantly accelerated and simplified, suggests a trial by Allianz Global Corporate & Specialty (AGCS) involving the successful implementation of a blockchain prototype for the captive insurance market.

“We are currently seeing many blockchain applications in the financial services industry and are eager to explore the potential of this exciting technology in the corporate insurance segment,” AGCS board member Hartmut Mai says in an AGCS statement issued Tuesday.

AGCS subsidiary, Allianz Risk Transfer AG (ART), worked with Ernst & Young – which provided blockchain advisory service – and digital agency Ginetta – which designed the intuitive, user interface – to create a prototype (video) for the existing captive insurance program of a long-time ART customer with global reach.

Because blockchain is a distributed ledger that is shared among a network of participants, any updates or changes to data are shared in real-time across all users.

“This creates a much faster, transparent, secure and efficient means of distributing information, conducting business processing and recording transactions across multiple parties,” AGCS reports.

Related: Applying blockchain technology could slash US$40 billion in costs for financial services: BIS Research

The Allianz prototype focuses on Professional Indemnity and Property insurance for a captive insurance program with local subsidiaries in the U.S., China and Switzerland.

“It translates core process flows in the captive insurance cycle into the distributed ledger environment and helps decrease the time from start to policy, policy to premium and claim to settlement,” the press release notes.

“The project deepened our and our client’s understanding of how applied blockchain technology will not only fundamentally change insurance as we know it, but also create new business models,” EY project manager Isabella Brom says in the statement.

In connection with the initiative, ART partnered with Citi Treasury and Trade Solutions, which provided the payment processing services related to the prototype.

“Citi is very proud to have been able to help Allianz achieve this industry milestone,” Tapodyuti Bose, global head of channel, enterprise and account services for Citi Treasury and Trade Solutions, says in the statement.

Related: AIG, IBM and Standard Chartered Bank pilot “first multinational insurance policy powered by blockchain”

By leveraging innovative, new technologies, Bose continues, “we are able to partner to design new business models and rapidly implement them in a matter of weeks.”

Saying the trial demonstrates regular transactions and cash transfer between insurers and clients can be significantly accelerated and simplified, “automated processing replaces the exchange of thousands of emails and massive data files,” ART principal Yann Krattiger explains in the statement. “Our customers benefit from increased speed, reliability and auditability,” Krattiger maintains.

The statement notes captive insurance programs – often used by multinational firms with global operations – are one of the most complex areas of commercial insurance.

The programs involve organizations creating their own self-insurance programs or “captives” that pool together selected assets or insurance exposures from operations. Premiums are collected from each operating companies and claims are paid out internationally as they arise.

Related: AEIC speaker predicts blockchain applications in insurance

“These captives may cover over 100 countries and hundreds of millions of dollars of insured assets,” AGCS explains, adding that blockchain technology automatically connects all parties involved in the captive insurance program: the captive management, local subsidiaries and the fronting insurer.

“The captive blockchain prototype is one further example of our commitment to leverage new technologies and drive innovation in insurance,” Mai suggests.

“With blockchain, much focus is put on the technology, yet in reality, perhaps 10% of the work is related to technology,” emphasizes Alan Cabello, project lead and innovation manager, AGCS Central and Eastern Europe.

“The other 90% is rethinking the underlying processes and these, in the end, are all about people,” Cabello continues.

ART, partnering with Nephila Capital Limited, has previously piloted the successful use of blockchain technology for transacting a natural catastrophe swap.

Related: Allianz Risk Transfer, Nephila Capital successfully pilot blockchain for Cat swap