Executives at reinsurance giant Swiss Re have said this morning that while conceptually the Blockchain Insurance Industry Initiative (B3i) remains an interesting opportunity, it didn’t seem like it was going to be profitable and required an end-to-end view.
It was announced yesterday that B3i has filed for insolvency after failing to raise new capital in recent funding rounds.
Formed in 2016 through a collaboration of insurers and reinsurers, the platform was designed to explore the potential of leveraging Distributed Ledger Technologies (DLT) within the re/insurance industry.
Initially, B3i raised tens of millions of dollars in funding over its first few years of activity, and also gained the support of some of the world’s largest insurance and reinsurance carriers.
In fact, Swiss Re, the world’s largest reinsurance company, and global insurer Allianz, were the first to use B3i’s technology to place an excess-of-loss contract on DLT back in April.
However, in a public statement, the platform revealed that after consultation with stakeholders, directors “collectively concluded that there was not sufficient support to continue with the venture at this stage.”
Today, in a media call following the release of its first half 2022 results, Swiss Re executives were questioned on the insolvency of B3i.
“I think it was a very quality effort, but at the end of the day, we did not see the volumes and the demand arrive that would have justified continued investment in this platform,” said John Dacey, Group Chief Financial Officer (CFO).
“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 in time, with this platform, it didn’t seem like it was going to go forward in a profitable way,” he added.
Expanding on this, Christian Mumenthaler, Group Chief Executive Officer (CEO) of Swiss Re, said that there could be a way how it could be successful, but that in his view, it requires an end-to-end view.
“You would need all insurance companies to basically create smart contracts at the beginning, at the origin. And then, based on that you could of course then construct a digital reinsurance contract that can be traded afterwards. And then you have the full efficiency end-to-end, and as claims come in, you would automatically pass them through to the reinsurer, for example. So, that’s very visionary, but it would imply that all insurers have to switch all IT systems and create smart contracts,” said Mumenthaler.
The way B3i was designed to work, he continued to explain, was simply looking at the interface between insurers and reinsurers.
“But, insurance companies, of course, have a huge amount of different data systems, and you just don’t get to the efficiency you need if you just start with that. It’s only part of the value chain,” said Mumenthaler.
It will be interesting to see what happens in the future regarding this kind of platform, and whether anyone can break the code and unlock the potential efficiencies that B3i claimed is achievable through the implementation of blockchain technology within the re/insurance sector.
But Mumenthaler raises a good point – that, in order for it to be successful, technology such as this will likely require everyone in the industry to embrace it, and not just some of the larger insurers, reinsurers and brokers.