Insurance carriers may be exposed to ‘silent’ risks from blockchain as companies begin to use the technology underpinning cryptocurrencies in their operations, according to Willis Towers Watson’s Magdalena Ramada.
Speaking at re-Insurance.com’s ‘Bermuda on Blockchain’ event in association with Xceedance and ChainThat on Thursday, Ramada warned attendees of the creeping exposure potential in blockchain similar to the unexpected cyber risks facing the industry.
“Perhaps you don’t know it, but you have some silent blockchain risk in whatever you are insuring, because some of you clients are actually using the blockchain in some of the products and processes you have been insuring,” she said.
“Even if you don’t want to apply [blockchain], you certainly need to know how it works and what the risks are associated with it, because you may want to insure it, or you may be insuring it already without knowing it in the same way we have silent cyber risks insured in certain policies.”
Ramada also pointed to the “transformation” of the risk world with the development InsurTech, and hailed blockchain as a potential solution to some of the pain points identified by start-ups in the sector which target the failings of the incumbents.
“So many start-ups that we saw five years ago trying to do peer-to-peer insurance or trying to do certain innovations in the insurance place are now thinking perhaps I should use the blockchain because it will enable me better to do what I wanted to do five years ago,” she said.
“So blockchain has met the InsurTech world in a very impactful way in the last two years and what have we seen, well when I started working on this I came up with these areas and I said well this is where blockchain is going to disrupt the insurance industry - we will have smart contacts of our event triggered, we have seen that - and we will have increased backend efficiency.”
“We will be better able to price and to assess risks because of certain types of solutions and then there will be new types of insurance and we will be able to reach new spaces.”
The distributed ledger technology expert was speaking at the end of a jam-packed day of discussion in which panellists debated the merits and pitfalls of blockchain technology and its potential to transform the (re)insurance industry.
Opening the event the Premier of Bermuda, David Burt, revealed that the country will have an InsurTech regulatory sandbox regime in place by the end of July in the latest sign of the island’s commitment to having a flexible regime that can adapt quickly to technological change.
He said that the island’s financial regulator, the Bermuda Monetary Authority (BMA), has proposed changes to the Insurance Act, which will go to Parliament next month for final approval.
Once approved, it will enable a regulatory sandbox to be established which will enable the BMA to work closely with start-ups, innovators and established (re)insurers.
Premier Burt - who has a background in technology and is the island’s youngest ever leader - explained: “[The sandbox] will enable the testing of products and services in a constrained environment to allow the regulator to get comfortable and to allow innovation to take place.”