The Institutes RiskStream Collaborative partners to develop parametric insurance

The Institutes RiskStream Collaborative announced a partnership with Arbol, a fintech company with a global climate-risk coverage platform and parametric coverage offerings, that will utilize blockchain technology to address the challenges of managing climate risk. By joining RiskStream's network of prominent organizations, Arbol integrates seamlessly into a consortium that focuses on insurance solutions.

Using insurance-specific blockchain and distributed ledger technology (DLT), the collaboration will focus on optimizing operations and improving customer experience across the insurance sector by creating a more streamlined data flow and facilitating swift payouts in parametric and reinsurance programs.

Patrick Schmid, president of RiskStream, writes to Digital Insurance,  "Enterprise blockchain is designed to help organizations with multi-party business process challenges. It excels in situations where brokers, carriers/cedents and reinsurers are working collaboratively, but may be doing so inefficiently. In these instances, enterprise blockchain provides a trusted means to share data or information privately and securely, automate various procedures, provide an audit trail where required and just generally help with speed and operational efficiency. In addition, once the initial foundation of a network app is built and rooted within an enterprise blockchain network, it provides a means for additional applications to bloom."

By leveraging blockchain capabilities, the partnership with Arbol and RiskStream aims to streamline processes and mitigate the impact of seasonal and catastrophic climate-related events.

Schmid states, "Shared business processes within the weather-related insurance domain remain largely paper-based and manual. Therefore, there is a significant opportunity to automate workflows, digitize processes and streamline hand-offs with use of blockchain technology. The Institutes RiskStream Collaborative is a consortium of brokers, carriers and reinsurers and an emerging ecosystem of industry partners working to leverage RiskStream's Canopy blockchain platform as an industry utility. The goal of the consortium is to spotlight multiparty business process opportunities for blockchain technology and to build, connect or enable solutions on Canopy."

The blockchain-driven parametric solution will streamline data of parametric loss calculations and foster transparency in the insurance industry – the solution could also potentially work for non-parametric solutions for reinsurance programs. 

"…With the advancement of weather data sources and a need for increased automation and efficiency, there has been a renewed interest in parametric insurance exploration using blockchain technology," Schmid explains. "This use case application aims to simplify the cedent and reinsurer operational process by leveraging weather data feeds (through blockchain oracles), which trigger smart contracts based on a peril event. Claim initiation, notifications and pre-set payments can be automated based on purchased coverage. The weather data feed triggers a smart contract based on wind speed and location (zip code) for a specific peril event. Based on the coverage purchased, claim initiation, notifications, and loss calculations are automated, which calculates at the individual policy level and pays out based on a reinsurance layer protecting the entire portfolio of the cedent. While the focus is currently on parametric, pieces of the tools developed could be beneficial for non-parametric reinsurance activities as well."