Legal & General (L&G) Insurance, the General Insurance business of L&G Group plc, has announced the completion of its blockchain trial to improve pension reinsurance underwriting.
With the trial, L&G Insurance came to the conclusion that blockchain technology could significantly simplify and accelerate the process of designing, managing and delivering a “fully compliant” pension reinsurance application and therefore brings an additional level of trust to the other business assets involved in putting together a risk transfer transaction.
“We are delighted with the results of our blockchain trial, which underlines our confidence in blockchain as a cost effective and scalable approach to better tackle the challenges of the reinsurance space. Blockchain enables us to reduce unnecessary handling costs and simplify the underwriting workflow while simultaneously enhancing the quality of our reinsurance analytics,” said Adam Weade, Chief Executive of L&G Insurance.
The blockchain solution, built on an Ethereum blockchain, managed the inter-party generation of a reinsurance application, resulting in a 1.2 per cent overall reduction in the standard set-up costs, resulting in financial savings worth £2.0m (£1.5m).
The solution allows an increased dynamic testing environment in which alternative outcomes can be modeled. For example, in the most expensive part of the process – triggering the restructure – the system allowed an error rate of 1.5 per cent, compared to the expected error rate of five per cent. This improved the transparency and quality of the process while reducing the amount of manual error. The technology also facilitated the use of financial instruments for calculating potential life expectancy outcomes without compromising on accuracy.
The technology has the potential to simplify the process of the entire reinsurance contract by reducing the carrying costs and time taken to produce standardised contracts, particularly in more complex areas of the market.
“We’re taking a number of important lessons from the trial, which include the potential to reduce manual error in the underwriting workflow and at the same time reduce transaction costs through leveraging these new technologies,” continued Weade.
The system also featured an element of intelligent accounting, which drew data on the investment performance of the reinsurer in real time, providing the structure and track of the structure and the nature of the business.
Andrea Miteski, PhD and MD in the field of reinsurance. Long term senior insurance executive with specialization of reinsurance optimization.