American International Group (AIG), IBM, and Standard Chartered Bank, in June 2017 announced they have successfully piloted the first multinational “smart contract”-based insurance policy using blockchain, a distributed ledger technology.

The three parties chose to execute this initiative in one of the most complicated areas of commercial insurance – multinational risk transfer – to better understand blockchain’s potential to reduce friction and increase trust in other areas of the insurance value chain. Coordinating management and placement of multiple insurance policies across multiple countries is a complex endeavor, as global employee benefits practitioners know very well.

The pilot solution was built by IBM and is based on Hyperledger Fabric – a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation.

The multinational master policy is written out of London and for the pilot, three local policies were chosen that cover the U.S., Kenya, and Singapore. These three jurisdictions were chosen because the U.S. is a large and complex market, Singapore is a growth market for Standard Chartered, and Kenya has a specific regulatory requirement, known as “cash before cover” which means that cover must be paid for before it is valid.

The blockchain solution is supposed to create a higher level of trust and transparency in the underwriting process, enabling AIG and Standard Chartered to execute multinational coverage more efficiently, while providing a shared view of policy data and documentation in real time.

This also allows visibility into coverage and premium payment at the local and master level as well as automated notifications to network participants following payment events. Third parties, such as brokers, auditors, and other stakeholders, also have access with a customized view of policy and payment data/documentation.

While the AIG-IBM-Standard Chartered experiment was conducted with P/C coverages, not employee benefits policies, its lessons should be a matter of interest for pooling networks; for providers of E.B. captives solutions; and for global underwriting plans. The choice of London as the “hub” for this multinational arrangement is not a surprise and Brexit is unlikely to become a serious negative factor in the future either.

A (rather basic) 3-minute promotional video is available here.