For this week’s episode, we spoke to Arun Narayanan, Head of Data and Analytics at Ed. This episode provides an excellent insight into the specialty insurance market at Lloyd’s and how blockchain based solutions can streamline processes, generate savings and promote product innovation.

Ed Broking is a global wholesale insurance broker which is headquartered in London with offices in China, Dubai, Germany, and the USA.  Ed Broking provides clients with broking facilities for a wide-range of specialty business lines such as aerospace, marine cargo, construction and energy.

What is blockchain?

 “Blockchain is a distributed ledger that sits on a peer-to-peer network where transactions are validated by every other member in the network.”

After providing a technical definition of blockchain, Arun proceeds to explain the benefits and features of blockchain:

* Blockchain can improve data sharing – Each transaction stored on the distributed ledger must be validated and these transactions are visible to all parties with requisite permissions. Thus, blockchain can enable data sharing between parties that may potentially have conflict of interests (for example, insurers and reinsurers.)

* Blockchains are secure – Cryptography (cryptographic hashes) ensure that transactions once stored on chain cannot be tampered with – this makes the information in the blockchain secure and verifiable.

* Blockchain can generate savings – There is a large amount of manual work done in the Lloyd’s market today (especially in the specialty business lines). Smart contractscan help automate some of these tasks to save time and money.  At the same time, immutability and time-stamping in a blockchain provides a verifiable audit trail for regulatory or internal compliance processes, thereby generating even more savings.

 

Will blockchain disintermediate brokers?

At the start of this calendar year, there was a lot of discussion around the possibility that blockchain will disintermediate brokers entirely. However, over the past few months, this idea has been replaced by a notion that blockchain will enable brokers to focus on their core competencies – translating complex risks their clients face and bringing appropriate risks to the correct sources of capital (underwriters).

It goes without saying that automation may eat into some of the existing revenues of broker, but it is important to remember that blockchain, which may cause this revenue loss, will also reduce costs and create significant new product opportunities.

 

Brokers leading the charge in blockchain – is this counterintuitive?

Some examples of brokers playing an instrumental role in blockchain are:

* Marsh: In collaboration with IBM, ACORD and ISN, Marsh has launched a commercial Proof of Insurance solution on the IBM Hyperledger protocol. Extending this idea of proof of insurance, in October this year, Marsh collaborated with Evident to launch a