<p>22 May 2017,Blockchain an Emerging,Technology with Wide PotentialApplication for Insurance,1. Making Sense of Blockchain,2. Financial Markets and Insurance Applications3. Swiss Re Activities4. Outlook,Table of Contents,2,22 May 2017,1. Making Sense of Blockchain,4,What isblockchain? &nbsp; &nbsp;Back end database - thatpermanently records transactions ina replicated shared ledger &nbsp; &nbsp;Value exchange network - formoving and validatingtransactions/assets between peerswithout the assistance ofintermediaries &nbsp; &nbsp;Transparent, updated in real-time,immediately available andselectively auditable by all relevantstakeholders,Implications &nbsp; &nbsp;Application of blockchain hasmultiplicity of effects: Consensus,provenance, immutability, finalityand resilience &nbsp; &nbsp;Trust layer over internet -establishes trust, accountability andtransparency within marketparticipants &nbsp; &nbsp;Enterprise applications usingblockchain range from back-officefunctions to parametric products tonew business models &nbsp; &nbsp;Well known cross-border, largescale application to-date ofblockchain technology is bitcoin,Making sense of blockchainBlockchain in a nut shell,Business values include:,# &nbsp;# &nbsp;# &nbsp;# &nbsp;#,Reduces reconciliation,Company 1Records,LedgerBankRecords,LedgerCounter-partyrecords,Hack,LedgerLedger,Ledger,Ledger# &nbsp;# &nbsp;# &nbsp;# &nbsp;#AuditorRecordsLedger,#,# &nbsp;# &nbsp;#,#,# &nbsp;# &nbsp;# &nbsp;# &nbsp;#Company 2RecordsLedger5,Ledger# &nbsp;# &nbsp;# # &nbsp;#Company 3RecordsLedger,Ledger# &nbsp;# &nbsp;# # &nbsp;#Expensive,Market Problem,Automated contractual workflowSimplified auditingInefficient &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; Vulnerable,Fraud ReductionDispute mitigationEnables business continuityLedger,Making sense of blockchainBlockchain Solution,?,?,Blockchain keeps track of who owns what, and who owned what in the pastFULL HISTORY OF ALL PAST TRANSACTIONS (E PERITIA RATIO)6,Making sense of blockchainBlockchain as a trust web - Bitcoin?,A wants tosend money toB,Thetransaction isrepresentedonline as ablock,The block isbroadcast toevery partyin thenetwork,Those in thenetworkapprove thetransaction isvalid,The blockthen can beadded to thechain,The moneymoves fromA to B,7,Making sense of blockchainWhy is blockchain unique? Fourtechnologies in one,Decentralized, peer-to-peer network,Append-only distributed databaseReplicated to all participant on the networkShows current status as well as status over time,DistributedLedger, &nbsp; Ensures that transactions are secure, authenticated &amp;,verifiable &nbsp; Verifies participants&#39; privacy while the ledger is shared &nbsp; Consensus is the process by which transactions are verified &nbsp; Decentralized consensus ensures agreement on &quot;single-version-of-the-truth“ (allows for consistency amongdistributed ledger) &nbsp; Programmable contracts which contain the business logicthat is automatically executed when pre-defined conditionsare met &nbsp; Ideal for arrangements that are: tailored, verifiable, signed,self-executing, embedded in blockchain networks,CryptographyConsensusSmartContracts,22 May 2017,2. Financial markets andinsurance applications,9,Financial markets and insurance applicationsBanking and exchanges have been firstmovers in applying blockchainBankingActive PoCs include areas in post-tradesettlement, trade finance, internationalpayments, corporate bonds, assettracking,E-FinanceSantander facilitating internationalpayments through Apples app “ApplePay”Users are free to transfer amountsfrom £10 to £10000 (payments in GBPto EUR &amp; USD),ExchangesNASDAQ is exploring blockchain to enablepeer-to-peer securities transactions toreplace current transaction systemsDTCC and Digital Asset partnered todevelop a blockchain solution for Repoclearing,10,Financial markets and insurance applicationsIncumbent insurers and insTechstartups beginning to see and test thevalue of blockchain,AXA Strategic Ventures invested inBlockstream, a company thatdevelops hybrid blockchainplatforms that connect public andpermissioned chains,Everledger is developing apermanent ledger for diamondcertification and transaction history,used by insurance companies andothers to combat fraud,PWC Whole saleReinsurance PoC -Placement and contract lifecycle documentation,SafeShare launched firstblockchain-basedinsurance solution for thesharing economy,Dynamis is a peer-to-peer mutual,offering unemployment insurance,built on a blockchain and relyingentirely on smart contracts forclaims,Allianz Cat bond Naturalcatastrophe risk trade on theblockchain for smoother facilitationand accelerated triggering of catswaps &amp; bonds,Commercial insurance placing platform -ChainThat&#39;sdecentralized application platform allows brokers andcarriers to place commercial and specialty risks in theinsurance market.,22 May 2017,3. Swiss Re activities,Visionary,Smart contracts,Maturity Level,Basic blockchain,(IGR),12,Data vaultSecondary market forsecuritized risk,Digital P2P mutuals,Placement and clienton-boardingTime,Swiss Re activitiesBlockchain to evolve with concrete businessapplications,Contract automationand intracompanysettlement,Digital Marketplace forplacing risk,MicroinsuranceLow-cost, index-based insurance withautomated payouts by smart contractsAutomated claims,Identity ledgers andsmart contractsGive access control overpersonal and sensitive databack to the end consumer,Parametric productsSharedReference Data,Intra Group RetrocessionProvenanceAutomate internal retrocessionprocess on blockchain platformwith smart contracts,1,record settlement.,Internally:blockchain for internal retrocessionAutomate internal retrocession process onblockchain platform with smart contracts.Integrated retrocession combining Cat XoL withQ/S: Create contract, process statement,compute cession, generate payment instruction,Network of retrocessionairesand retrocedents within Swiss Re group (Intra-Group Retrocession: IGR),Within the reinsurance market covering cessionsbetween insurers, reinsurers andretrocessionaires,Externally:extend network across the industry (B3i)Once proven, extend network across insurers,reinsurers, retrocedents, retrocessionnaires.Most natural fit for proportional contracts, e.g. non-life quota shares, as well as simple excess of lossSwiss Restructures.,ExternalParty BExternalParty D,ExternalParty AExternalParty C,2,Swiss Re Internal,Benefits include:1) acceleration of process and settlement 2) reduction in cost and operational risk3) increased transparency for all participants 4) better quality cash management13,Swiss Re activitiesProof of concept for IGR process is the firststep in establishing industry standards,LocalInsurer,Swiss Re activitiesBlockchain implementation of parametric productsfor low premium, high volume businessIntegration of Blockchain and Smart Contracts into the Microinsurance / Insurance-on-DemandMarket &nbsp; Low premium, high volume business &nbsp; Transaction fees are the main obstacle to it &nbsp; Blockchain might offer a way to solve this issue and gain inefficiency along the insurance value chainIndex-based insurance for severe weather conditions :Severe weather conditions,triggers purchase of on-demandinsurance,Upon purchase of E-FlightTicket: a smart contract forFlight Delay is generated and,posted on the blockchain14,Flight Delay,Automatic payout of acompensation of apredefinedamount |X|,Boarding,Community ofPolicyholders (e.g.SmallholderFarmers)Flight Delay Compensation:,22 May 2017,4. Outlook,Source: World Economic Forum16,Confidentiality/PrivacySystems integrationScalability,OutlookSignificant hype, early promisesTop ChallengesRegulatory environmentCollective standardizationLegal Framework,17,The blockchain is not a panacea, and the technology and business applications are stillevolvingHowever, the technology has potential to enhance cooperation among re/insurers, to reduceoperational costs and to create new product and enhancement opportunities,OutlookMarket outlook for 2017 &nbsp; &nbsp;Investment will get focussed towards establishing standards, achieving scalability,ensuring confidentiality etc. &nbsp; &nbsp;Private blockchains with limited subset of trusted participants will emerge &nbsp; &nbsp;Blockchain “inspired” applications addressing specific industry needs (e.g. R3Corda) &nbsp; &nbsp;Regulators step in to assess challenges and benefits &nbsp; &nbsp;First wave of enterprise applications would go into production in financial services &nbsp; &nbsp;New areas of research will include potential synergy between blockchain, IoT andBig Data,22 May 2017,18,Expressions of individual views by members of the Institute and Facultyof Actuaries and its staff are encouraged.The views expressed in this presentation are those of the presenter.,Questions,Comments,Legal notice,19,©2017 Swiss Re. All rights reserved. You are not permitted to create any modificationsor derivative works of this presentation or to use it for commercial or other public purposeswithout the prior written permission of Swiss Re.,The information and opinions contained in the presentation are provided as at the date ofthe presentation and are subject to change without notice. Although the information usedwas taken from reliable sources, Swiss Re does not accept any responsibility for the accuracyor comprehensiveness of the details given. All liability for the accuracy and completenessthereof or for any damage or loss resulting from the use of the information contained in thispresentation is expressly excluded. Under no circumstances shall Swiss Re or its Groupcompanies be liable for any financial or consequential loss relating to this presentation.,Thanks,19,</p>