Germany's Allianz tries to use blockchain technology to promote catastrophe bond market

Rage Review : Insurance giants such as USAA, Lloyd, SafeShare, and John Hancock have all started to develop blockchain technology. Recently, Germany's Allianz also announced that it would test the role of blockchain in catastrophe swaps and bond markets. It hopes to use blockchain technology to replace manual processes to improve the speed of compensation and the reliability, controllability, and speed of catastrophe bonds, and avoid the risk of human error. Allianz is the largest insurance company to announce the exploration of blockchain in recent months.

Translation: Annie_Xu

German insurance giant Allianz announced that it has successfully used blockchain-based smart contracts to process catastrophe swap and bond transactions, believing that the technology can promote the marketization of financial instruments.

Catastrophe swaps (CAT swaps) and bonds are trading instruments that allow insurance companies to hedge against potential losses from major disasters based on predetermined trigger conditions.

However, Allianz pointed out that compensation between insurance companies and investors after a severe disaster is often delayed for weeks or even months; using smart contract technology to automate the compensation process has the potential to shorten the time to within hours.

Allianz and investment management company Nephila have partnered to test a technology that shows using blockchain smart contracts can “significantly speed up and simplify” transaction processing and fund settlement between insurers and investors.

Nephila also pointed out other benefits of testing the technology, including increased marketability of swaps and opportunities to use smart contracts for other insurance transactions.

Richard Boyd

Richard Boyd, Chief Insurance Officer at Allianz Risk Transfer, said:

“Blockchain technology can increase the reliability, controllability and speed of catastrophe swaps and catastrophe bonds because it reduces the manual operations, verification and auditing required by middlemen to determine the legitimacy of investor transactions and payments.”

“By replacing manual operations throughout the process, delays and the risk of human error can be avoided.”

Allianz is the largest insurance company to announce it is exploring blockchain technology in recent months.

This week PricewaterhouseCoopers (PwC) announced it would sponsor blockchain research and the development of a proof-of-concept prototype in group insurance, and in April insurer John Hancock partnered with ConsenSys and BlockApps to develop a proof-of-concept using blockchain.