One of the oldest branches of the insurance business will adopt one of its newest technologies when marine insurers begin using blockchain in contracts next year.
AP Moller-Maersk, the Danish conglomerate that includes the world’s largest container shipping business, and the insurers MS Amlin and XL Catlin are among the companies involved in a new blockchain platform that will go live in 2018.
The scheme, also backed by the consultants EY, technology group Microsoft and data security provider Guardtime, aims to reduce delays, paperwork and disputes in the $30bn global marine insurance market.
It has already undergone a 20-week “proof of concept” exercise this year.
Blockchain — the technology behind bitcoin, the virtual currency — is a shared, encrypted database that allows users to securely record details of transactions or contracts in several places at once.
The new marine insurance system will be used for contracts relating to a limited number of ships and journeys in 2018, before being rolled out more widely.
“There is an enormous amount of trust and respect in the London [insurance] market . . . but the challenge is that it is very admin-based, very paper-based and there has not been a lot of innovation to reduce costs,” said Shaun Crawford, global insurance leader at EY.
“Everyone is sending bits of paper around and contracts are often not signed until after the ship has arrived at the final port.”
Lars Henneberg, head of risk and insurance at AP Moller-Maersk, said: “Insurance transactions are currently far too tedious and frictional . . . Blockchain technology has the potential to facilitate the desired development that is long overdue.”
Mr Crawford said the project would enable Maersk’s own pool of data, on topics from temperatures to ship flag changes, to be seamlessly incorporated into contracts in real time so that “one version of the truth” prevails throughout, while the data itself remains in Maersk’s possession.
The companies hope the system will speed up billing and collection of payments, and bring more clarity on claims histories that are used to inform pricing decisions.
Ultimately, Mr Crawford said, it may help insurers to reduce their capital requirements under the European Solvency II regulations by enabling them to assess risk more quickly and accurately.
If underwriters and others choose to support the scheme, it might cut expense ratios, which measure costs in relation to premiums earned, by up to 70 per cent, he added.
Guardtime has also worked with the Estonian government on its digital government initiatives and with the US Defense Advanced Research Projects Agency, Darpa, on military blockchain technology.
Other insurance groups are also experimenting with the use of blockchain, although so far the industry has been slower to take up the technology than banking, where a large number of pilot projects are under way.
A group of Europe’s largest insurers, including Aegon, Zurich, Allianz, Munich Re and Swiss Re, are exploring its use in the reinsurance sector, while the US insurer AIG this year sold what it says is the first blockchain-based multinational insurance policy to UK-based bank Standard Chartered.Discover More