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May 31, 2019

From Marsh: Insurtech Opportunities on the Captive Landscape

From blockchain to mobile apps, digitization is creating opportunities for captive insurers.

Key Takeaway
Innovations such as blockchain and mobile applications represent new risks to insure and can also reduce operating expenses.

Our colleagues at Marsh have just released their 2019 Captive Landscape Report Securing Your Future with a Captive:  Captive Insurers Deliver Value to a Variety of Stakeholders, which lines out the key issues facing captive insurers and their stakeholders.  The report provides a special focus on the role of technology innovations for captives and their stakeholders, which is excerpted below.

The wave of digitization across industries, including insurance, is creating opportunities for captives to invest in technology innovations that can reduce administrative expenses. As digital experiences reshape consumer expectations, businesses are taking cues to deploy technologies that make it easier for users to find information and complete transactions.

For captives, innovations such as blockchain and mobile applications represent new risks to insure. They can also reduce operating expenses by facilitating the distribution of policy information, proof of insurance, and claims payments.

Blockchain, a popular term for distributed ledger technology, enables multiple parties to record ownership of assets, without any single party able to change or tamper with the records. Registering data on a blockchain essentially creates a digital asset in a process known as “tokenization.” Tokens are an efficient way to manage information, and blockchain technology ensures only one copy of a token exists. This principle is what gives value to cryptocurrencies; each “coin” is its own digital file that cannot be copied or altered because the file is stored on a series of distributed ledgers.

A wide variety of assets can be tokenized, which means an equally broad set of exposures. Because blockchain is a new technology and loss exposures are not yet well understood, the commercial insurance marketplace finds tokenized assets difficult to insure. This creates an opportunity for captives in at least two ways: offering tailored coverage for blockchain risks and using blockchain technology to make insurance policies tokenized assets. An insurance contract registered in a blockchain can be accessed by multiple parties, offering proof that risks are formally funded.

Mobile apps are another technology opportunity for captives. Commercial insurers are increasingly using apps to let policyholders manage their account information, pay premiums, and report claims. Some are even using mobile payment apps to settle claims. Marsh recently unveiled a cloud-based digital broker platform, Bluestream, that enables clients to offer insurance products and services to their customers, contractors, and employees. Captives can use Bluestream to similarly offer coverage to third parties, a strategy that can turn a captive into a profit center for its parent organization.

The full report covers abilities to meet business needs, business cases for captives, and a robust global overview of captives.  Securing Your Future with a Captive concludes with a discuss of ways that captives help secure their organization's future.  

Read the full report from Marsh, Securing Your Future with a Captive:  Captive Insurers Deliver Value to a Variety of Stakeholders.


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