Blockchain to deliver up to $50bn cost savings per year to re/insurance sector
Applying blockchain to the global re/insurance market could deliver operational cost savings of 10 percent to 25 percent or $20 billion to $50 billion each year, according to a report by blockchain solutions provider R3 and ChainThat.
Around 30 percent to 60 percent of these savings would be generated in the accounting and settlement (A&S) area. These processes result in many interactions between counterparties (such as brokers and insurers) as they first agree upon debts, and then authorize, execute and reconcile payments between each other. Complexity and operational difficulties result from coordinating actions and information between the different organisations and systems.
A blockchain or distributed ledger can serve as a shared record between counterparties and can coordinate and reduce complexity in their shared A&S processes. Thus, the technology can reduce operating costs and speed up processing across this insurance distribution chain.
Payment settlement and clearing can be achieved with representations of fiat money on-ledger and therefore directly on blockchain-based platforms, meaning there would be no need to use cyptocurrencies such as Bitcoin and Ethereum, the report notes.
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