Symbiont demonstrates blockchain catastrophe swap insurance to insurance executives

Rage Review : Symbiont demonstrated a blockchain-based catastrophe swap insurance application during the Shanghai Blockchain International Week this week, combining smart contract technology and Symbiont's mysterious blockchain technology Assembly to improve the efficiency and accuracy of insurance claims. Many of the audience on site came from the insurance industry in Europe and Asia, which was like a global insurance industry directory. Although there are still uncertainties, the company's product director Ron Papanek firmly believes that a bright future will be built on code.

Translation: Annie_Xu

During the Shanghai International Blockchain Week this week, Symbiont demonstrated its new product to a group of insurers, reinsurers, investors and media. The next time a tornado destroys large tracts of land and property in California or Ohio, the catastrophe swap insurance blockchain platform will allow victims to receive compensation as quickly as possible.

Mississippi, however, was not so lucky.

The startup demonstrated a system that combines smart contract technology with Symbiont’s mysterious blockchain technology, Assembly, to automatically allocate funds.

Although Symbiont has not yet released the inner workings of Assembly’s technology, the company’s product director Ron Papanek said the technology can execute 80,000 transactions per second and is an “extremely mature” platform.

Although the demonstration focused on an insurance product, Papanek said Assembly can run on a variety of enterprise-specific use cases using smart contracts, or self-executing code.

"We quickly built this application to demonstrate the capabilities of the system, and based on market demand, it can be quickly extended to edge cases in need."

Decomposing Catastrophe Swap Insurance

First, an insurance company can set up a catastrophe swap insurance by entering detailed information into the insurance smart contract, including event threshold, fixed rate, currency, floating rate effective period and payer.

The smart contract is then uploaded to the private chain, and the reinsurance company can instantly see the relevant information, which will be displayed side by side with the insurance company's interface.

However, the uploaded contract will not take effect immediately, but requires the approval of the reinsurer. Then download the PDF version published by ISDA (International Swaps and Derivatives Association), all data can be tracked through the blockchain and marked in red.

"This way both parties to the insurance have complete documentation of the contract."

Papanek filled out a report about future use cases and highlighted two virtual projects launched in California, Ohio and Mississippi. In real-world applications, the data for these projects will be provided by Verisk Analytics.

The system uses a “time travel” feature, demonstrating the power of smart contracts, to move forward in time, with insurance coverage recorded on the blockchain and cross-referenced with catastrophe swap policies, although while California and Ohio received $1 million, coverage did not include Mississippi.

Actual catastrophe swaps would be paid out in cryptocurrencies, although Papanek said insurance companies won’t implement them anytime soon. The tokens used to make the transfers would represent ownership of an account at a custodian bank.

Blockchain insurance is not on track yet

The nodes of the Assembly blockchain are what Symbiont calls “containers,” which can be cloud or local storage that each participant can manage. Hardware security modules (HSMs) manage keys, including SafeNet Network HSMs, formerly known as Luna SA, and AWS Cloud HSMs.

Each node has a dedicated channel for obtaining transaction data. Some special transaction data is only available to specific participants, while some participants may only be able to see some special names.

Assembly’s core Byzantine Fault Tolerance (BFT) technology limits mining, and there is no native cryptocurrency. Papanek said the ledger can be tailored to specific industries by writing smart contracts for specific cases.

Symbiont, based in New York, has partnered with Ipreo, a financial data company owned by Blackstone and Goldman Sachs, to build blockchain-based financial services applications.

Who’s Who in the Insurance Industry

81 investors and insurance industry members attended the relevant product presentation meeting.

In an informal poll before the company presentations, half of the attendees were just beginning to explore blockchain, while true blockchain experts were in the minority.

Caitlin Long, new Symbiont president and Morgan Stanley executive director, said a large number of attendees came from Europe and Asia.

"This is actually a 'Who's Who' of the global insurance industry, including property insurance, casualty insurance, life insurance, reinsurance and other companies as well as insurance securities investors."

The insurance industry has explored specific use cases. In April, insurance giant John Hancock began internal blockchain testing. German insurance giant Allianz recently completed a blockchain catastrophe swap insurance test with investment management company Nephila.

Is it legally binding?

At the end of the presentation, Papanek answered questions about the legal effect of such a contract.

He explained that even traditional contracts are some kind of evidence of the agreement between the parties. Therefore, each party has the right to decide whether the contract is superior to the code-based smart contract, or vice versa.

As for the future direction of the insurance industry, Papanek is very certain.

"We are definitely moving towards a code-based world."