Early in the Summer, B3i - an industry initiative to leverage the blockchain technology in insurance - announced it would stop its activity. Coming back to its history, what could we learn from this kind of re/insurance setup? What does it say about opportunities to apply that technology to this industry? What could we expect next?
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B3i is more than a startup, because it started as an innovation initiative in insurance. And then it became a full-fledged company.
For those who don't know, B3i was launched in October 2016 as a market initiative (a consortium to be precise) aimed at developing use cases for blockchain technologies in insurance.
At the time, the blockchain was on everyone's lips and it was THE technology that everyone was talking about in financial services. It is therefore logical that insurance takes hold of the trend and asks itself the question of the impact it could have on its operation. By the way, do you remember that a few months after the launch of b3i, France Assureurs also announced an exploration of blockchain technology. That was in November 2017.
In short, after a launch in 2016, it was only a few years later, in 2018, that the initiative transformed into a company in its own right: B3i Services AG, registered in Switzerland. The objective is unchanged, but the approach is more structured. Moreover, during its existence the company will raise a total of $23m if Crunchbase is to be believed. The last round was announced at the end of 2020. At that time, moreover, and it was at its peak, around fifty people worked within the company, according to figures available on LinkedIn.
In terms of activity and ecosystem, back at that time, more than twenty insurance players were gathered around the same table. And I use the term "insurance player" voluntarily since both insurers (like allianz, axa, liberty mutual, mapfre or tokio marine) and reinsurers (like hannoverRE, scor, munichRE or VIG RE) worked together. The stated objective was to, I quote: allow stakeholders to interact, negotiate and place risks more securely and efficiently.
B3i notably launched its "Fluidity" platform, which presents itself as a network allowing insurance players to develop decentralized applications. Two applications were formalized around this platform: "ritablock" around data subjects, to share claims data on a large scale and in a secure manner between insurers and reinsurers. The second "claimshare" application was also related to claims management, from a fraud detection angle seeking to avoid double payments.
But by presenting itself as a market initiative, B3i has always had to face questions about the relevance of the approach itself. In particular because of the very nature of the underlying technology: the blockchain, which is a shared or decentralized network (it is in a way the opposite of a market approach, by definition).
Moreover, let's briefly return to blockchain technology: launched in 2008 in the midst of the financial crisis, this technology is based on advanced cryptographic mechanisms to allow the storage and sharing of information in a decentralized manner. The best-known use case of this technology is Bitcoin - digital currency - where it is the network (the blockchain) that validates the transfers by ensuring 1) the good ownership of the property to be transferred and 2) the uniqueness of the transfer. With this analogy we see that the network - the blockchain - acts by its operation as a trusted third party in a digital world, where in the real world it would be a bank in the case of payment.
It is therefore logical that this decentralized technology should be explored in financial services, and in insurance in particular, particularly with this idea of applications for risk transfer. It is also logical that we find insurers and reinsurers on the job.
But it is also its limit. Although the initiative initially sought to bring together partners from outside the insurance world, few names were ever shared on its showcase site.
And over the years, the company has launched several initiatives and announced in 2019 a use case around "catastroph excess of loss". Here again it is a question of applying a new technology to improve an existing situation. This was also the whole question - almost philosophical - around the approach: should we seek to improve already existing processes thanks to this technology, or favor the exploration of new opportunities offered by this initiative (like of the DEFI wave - decentralized finance - which sees many applications developed and initiated to allow financial services to adapt or be redesigned in the light of a digital economy).
Still, after this 2019 announcement, it was only in April 2022 that the first contract was formalized between Allianz and SwissRE. This remains the first and only contract of this type made using blockchain technology.
Finally, in July 2022, the company announced its bankruptcy, explaining that it had not been able to raise the funds it needed to continue its activity. Its shareholders, the insurers and reinsurers mentioned above, therefore seem to have judged that the value delivered to date did not deserve additional funds.
It remains to learn the lessons of the end of this initiative: does this mean that blockchain technology has no future in insurance? unlikely. is it more of a bad exploration (applying the technology to processes that already work very well without the blockchain) maybe? or is it linked to the approach itself, this local initiative which would have blocked development. It certainly didn't help me.
It is also an opportunity to question the place of insurance in the wave of blockchain, crypto, defi, web3, etc. Indeed, while financial services as a whole inspire entrepreneurs seeking to build the digital economy of tomorrow, purely insurance applications are still limited.
I am obviously thinking of Coincover, which insures crypto assets against hackers; Uno Re one of the few DeFi applications in insurance or Ensuro which presents itself as the first provider of insurance capacity operating on the blockchain. Here are some examples. If you have any others in mind, feel free to share them in the comments!
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