Blockchain has received a huge amount of hype in insurance technology. Part of me says "rightly so" as it has the potential to revolutionise the industry.
However, finding real applications for the technology has been like finding hen's teeth. IT has been a bit of a solution looking for a problem.
Now, finally, a real blockchain use case has emerged. It requires the industry to think differently about what is underwritten and how. It requires no real claims settlement effort at all. Certainty and simplicity are the key.
A very interesting development!
There is one asset class, that takes a literally catastrophic view on the future, and it is booming: catastrophe bonds. Last week, the World Bank issued its largest-ever cat bond, offering as much as $360 million in payouts to Mexico in the event of tropical cyclones and earthquakes. That’s where the new transaction -- and the blockchain -- come in. Last week saw the first-ever use of blockchain as the settlement mechanism in a cat bond. It is a neat and efficient use of blockchain’s distributed ledger capabilities (which allow settlement without an intermediary) and the parametric aspect of a cat bond (which triggers settlement without any claim). In the event of a catastrophe so great that it disables even insurance settlement systems, the distributed ledger should still function without human engagement.