Vancouver-based Fineqia International Inc. has taken an equity allocation in Black Insurance, a Tallinn, Estonia-based digital insurance startup on the blockchain that has set its sights on creating a direct investor-to-broker relationship, bypassing the need for a traditional insurance company.
Terms of the deal were not disclosed, but Fineqia said its investment sum represents less than 1% of its market capitalization. Fineqia says the strategic investment will strengthen its existing pipeline of asset-backed debt securities that will be offered to investors on its platform.
“We are excited to back Black, which allows for a wide variety of investors to participate in a high-quality insurance finance product,” said Fineqia’s CEO Bundeep Singh Rangar, who also helped found Black. “Black represents everything we want from issuers on our platform: innovation, disruption and ambition. We believe that insurance is one sector ripe for blockchain disruption and Black Insurance has the right team experience to make this happen.”
Black intends to become a licensed insurer. Its blockchain platform would enable the underwriting of new insurance policies via insurance syndicates akin to the Lloyd’s market. It is intended that insurance brokers and agents will be able to create bespoke insurance schemes faster and cheaper using the Black platform.
A white paper explains Black Insurance’s business model in the following basic terms. “Black will be a licensed insurance company that provides insurance capacity to agents, brokers and MGAs, enabling them to launch their own virtual insurance companies. Our capacity comes without the traditional overheads of insurance company, while using blockchain as main platform to get rid of centralized insurance companies.”
Black will price the risk of specific syndicates and sell fractional ownership in such pools in the form of tokens representing the unit value of each syndicate’s expected financial return. The insurer says this process makes participation in insurance syndicates more efficient and transparent via time-stamped and traceable transaction records recorded on the blockchain.
Black is gearing toward an initial coin offering (ICO) later this year. It plans to sell utility tokens that will be used for transacting on its platform once it is publicly available.
Research by Accenture indicates that a third of all insurers are planning to use blockchain in the next two years and another third have it on their agendas for consideration.
“There is a lot of appetite in the insurance industry to innovate and cross the threshold to a radically new era,” says Risto Rossar, Black’s founder. “We already have dozens of requests from brokers across the world to join the platform. They have grown impatient of the innovation-averse, slow mindset dominating the industry, and see Black as a way to make their aspirations a reality.”
Black touts its use of blockchain in insurance as a means to decrease operational costs, increase security and transparency, mitigate against any single point of failure, and enhance the reputations of all parties involved. “By establishing a marketplace where investors and insurance underwriters can directly trade with one another, Black seeks to minimize transaction costs,” the company says.