The industry’s blockchain project, B3i, has ceased activities and filed for insolvency following unsuccessful funding rounds.
“The directors, following consultation with the shareholders, have collectively concluded that there was not sufficient support to continue with the venture at this stage,” said an announcement on the company’s website.
“I think it was a very quality effort, but at the end of the day, we did not see the volumes in the demand” that would have justified continued investment 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 may be that at some point in time, somebody breaks the code, but at this point of time with this platform, it didn’t seem like it was going to go forward in a profitable way,” said Dacey during a Swiss Re media call to discuss the reinsurer’s first half results.
B3i, which stands for The Blockchain Insurance Industry Initiative, began life 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, which were joined in 2017 by another 10 companies: Achmea, Ageas, Generali, Hannover Re, Liberty Mutual, SCOR, Sompo, RGA, Tokio Marine and XL Catlin (now AXA XL). Willis Towers Watson also was a member of the strategic advisory board.
In 2018, B3i formed a company called B3i Services AG in Zurich, which was supported by 20 major re/insurer investors by 2020.
During the Swiss Re media briefing, Christian Mumenthaler, Group CEO, speculated on a way that blockchain could be successful.
“We would 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, which would create full end-to-end efficiency, Mumenthaler added.
The problem, he noted, is that all insurers would have to switch their IT systems to be able to create smart contracts.
B3i was trying to improve the interface between insurance companies and reinsurers, but not at the original risk, allowing for end-to-end contracts.
“You just don’t get to the efficiency you need, if you just start with that,” Mumenthaler said.
Insurers and reinsurers that invested in B3i had hoped that blockchain technology used in insurance transactions would help reduce costs and contract uncertainties. An example often cited was the case of the Sept. 11 terrorist attacks. The coverage for the World Trade Center had just been agreed but the paperwork wasn’t finalized when the planes hit the towers. Years of legal proceedings followed.
If blockchain solutions had been available and the policy had been entered into one common, underlying ledger where both parties’ acceptance could have been verified, then the lengthy legal wrangling could have been avoided – or at least that was the working theory.
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