Blockchain offers the ability to handle secure, multiparty transactions across geographies, automate rules through smart contracts and bring counterparty transparency while maintaining an immutable audit trail of transactions. These attributes could set a standard for regulatory compliance and prove to be a game-changer for the reinsurance industry by revamping the contract management process, automating and streamlining inefficient manual processes and addressing key pain points across the value chain.
A Blockchain Solution
In facultative reinsurance, a “chain of trust” is the central theme between cedent, broker and reinsurer. This is based on an intangible promise to pay, to disclose authentic and accurate data that describes the insurable interests of the cedent and to pay in a timely fashion. Due to the level of risk involved, the agreements need to be carefully drafted, with real-time transparency and collaboration essential for all parties. This process can be very complex and operationally inefficient; existing options to monitor such agreements require the adoption of complex technological solutions. Cedents, brokers and various reinsurance companies discuss and agree to indemnify a ceding company against all or part of its loss. Among them, the broker plays a crucial role by acting as an intermediary between various parties.
We envision a permissioned consortium-based blockchain including cedents, brokers and various reinsurers to help reimagine the current facultative reinsurance workflow. The proposed solution can reduce turnaround times and automate processes through predefined smart contracts.