Allianz Global Corporate & Specialty (AGCS), the Allianz Group's dedicated carrier for corporate and specialty insurance business, has trialed blockchain technology for a global captive insurance program including cash transfer between countries.

AGCS’s Allianz Risk Transfer (ART) line of business has partnered with EY (Ernst & Young) as blockchain advisory service provider and digital agency Ginetta to create a blockchain prototype solution for the existing captive insurance program of a ART customer with worldwide reach.

ART has also partnered with Citi Treasury and Trade Solutions, which offered payment processing services for Allianz’s blockchain prototype.

Allianz claims that the results show that blockchain technology can improve efficiency of corporate insurance transactions on an international scale.

AGCS board member Hartmut Mai said: “We are currently seeing many blockchain applications in the financial services industry and are eager to explore the potential of this exciting technology in the corporate insurance segment.

“The captive blockchain prototype is one further example of our commitment to leverage new technologies and drive innovation in insurance.”

Captive insurance programs are considered to be very complex areas of commercial insurance. These are established by multinational organizations which self-insure instead of purchasing insurance. They create their own self-insurance programs or ‘captives’ that pool together selected assets or insurance exposures from their global operations, collect premiums from each of their operating companies and pay out claims internationally, when they surface.

Allianz says that such captive insurance programs can be seen across in more than 100 countries and have hundreds of millions of dollars in insured assets.

The company has partnered with several captive owners to administer each program, using its international network in 210 countries and territories to comply fully with local regulations.

It claims that blockchain technology can automatically connect all parties involved in the captive insurance program including the captive management, local subsidiaries and the fronting insurer.

Blockchain is a distributed ledger which is shared among a network of participants and records transactions and data entries. Any updates or changes to the data are shared in real-time across all users.

Allianz captive insurance blockchain prototype is claimed to be built on the Blockchain framework Hyperledger Fabric 1.0 and it focuses on two types of insurance policies including Professional Indemnity and Property, for captive insurance program with local subsidiaries in the US, China and Switzerland.

This prototype works by looking at three common process flows in the captive insurance cycle including annual policy renewals, premium payments and claims submission and settlement. These processes are translated into distributed ledger environment that shortens the time from start to policy, policy to premium and claim to settlement.

EY project manager Isabella Brom said: “The captive insurance blockchain prototype is a prime example of EY’s approach on co-innovating with our clients. It allowed us to demonstrate and trial the power of distribution and decentralization in the transformation of the insurance industry, using the Hyperledger Fabric Composer toolset to achieve fast and flexible prototype results.

“The project deepened our and our client’s understanding of how applied blockchain technology will not only fundamentally change insurance as we know it but also create new business models.”

Image: Allianz to test blockchain technology for captive insurance programs. Photo: Courtesy of Allianz.