Fintech

Insurance technology (insurtech) and insurance-linked securities (ILS) start-up Ledger Investing has successfully completed its first transaction, directly securitizing a portfolio of non-standard passenger auto insurance between an MGA and the AIG-owned ILS fund manager AlphaCat.

Blockchain is a potential game-changer for the insurance and reinsurance sector, according to Fitch Ratings, who forecast that the technology will become increasingly embedded in the fabric of the re/insurance market over the coming years and that ILS related use-cases will continue to emerge as well.

At the Monte Carlo Reinsurance Rendez-vous event a working prototype of a blockchain powered reinsurance transaction platform was launched by the group of fifteen global insurers and reinsurers that make up the B3i (Blockchain Insurance Industry Initiative).

Insurtech start-up Ledger Investing, which counts ex-AIG capital markets head Samir Shah as its CEO, is in the process of completing a $5 million round of seed funding to help it build out its insurance risk securitization platform and expand its team.

Global insurance and reinsurance players Aegon, Allianz, Munich Re, Swiss Re and Zurich have teamed up to collaborate on developing and proving the use of blockchain distributed ledger technology and smart contracts within the industry, beginning with a retrocession proof of concept.

While alternative capital has tested the marketplace, fundamentally changing the risk transfer business and been said to have disrupted the risk-to-capital value-chain in recent times, Aon says it’s important to remember that it’s provided an innovative force within insurance.

Japanese and global property & casualty insurance group Sompo Japan Nipponkoa Holdings Inc., is the latest to embrace use of blockchain technology for risk transfer as it trials the technology for catastrophe and weather linked derivative transactions.

The adoption of distributed ledger technology such as the blockchain could improve the efficiency of risk capital, in insurance, reinsurance and ILS markets, by reducing frictional costs, Bermuda Business Development Agency (BDA) CEO Ross Webber said.

The reinsurance and broader risk transfer market is increasingly becoming a process  of matching risk to the right capital in the most efficient manner possible, with industry trends pointing to a need to accelerate the transport of risk to capital.

Blockchain, or distributed ledger technology, was “made for reinsurance,” according to PwC, and could represent a cost saving opportunity of up to $10 billion as companies look to increase efficiency and understand what the development of insurtech means for their business.