Blockchain, Riskblock, and Bitcoin. Blockchain technology and how it is impacting how risk management professional do business.

What is Blockchain? Blockchain is a technology that uses cryptography on a distributed database that includes all previous transactions in chronological order on a permanent public ledger. Bitcoin was the first blockchain created in 2008 by Satoshi Nakmoto to be used as digital cash Blockchain has expanded from just a cryptocurrency and now has a variety of business uses

Blockchain details Additions are permanent Solves double spending problem Establishes trust and eliminates a needed centralized authority which: 1) increases security 2) tears down barriers 3) Speeds up transactions 4) improves privacy

How does Bitcoin work? Alice “sends” Bob Bitcoin The transaction is timestamped and publicly put on a ledger with a cryptic hash Miners verify the transaction by using CPU power to solve for the transaction with a complicated math equation. About every 10 minutes a block is verified. Miners race to solve for the solution by verifying transactions. The miner that completes the block of transactions is rewarded with bitcoin. Once the block is solved it is added to the blockchain Once it is verified Bob “receives” the bitcoin.

Riskblock The Institutes RiskBlock Alliance is an unprecedented, industry-led consortium collaborating to unlock the potential of blockchain across the insurance industry. RiskBlock will accelerate time to market and adoption through real-world applications and impactful blockchain use cases. The RiskBlock consortium is currently accepting new members. Join forces with The Institutes and other RiskBlock members to realize the potential of blockchain. (TheInstitues.org) 30+ insurance partners have joined Riskblock Sponsored by The Institutes and LIMRA(Life Insurance and Market Research Association) Some current Members American Family Insurance, Chubb, Erie, Farmers, The Hanover, Liberty Mutual, Marsh, Munich Re, Nationwide, State Auto, USAA.

Possible Uses in Insurance Use Case Objectives Proof of Insurance Establish electronic safekeeping Enable automatic information updating Subrogation Facilitate netting of payments Optimize costs and streamline processes Parametric Insurance Expand parametric insurance Automate assessments and payments First Notice of Loss Optimize information flow Facilitate efficient data sharing

Current and possible Insurance uses Could be used in health insurance to verify claims only paid once. Nationwide Proof of insurance on the blockchain for auto insurance. Insurance Journal article has B3i which is 15+ reinsurance companies use a property excess of loss reinsurance contract with blockchain Used in Cargo insurance to verify delivery of products or not.

Other Non-insurance uses Micro transactions (download a movie or a song for pennies) Advertising Transfer money internationally without a intermediary or large fee. Logistics companies can use smart contracts (Ether) to verify shipments were made Regulatory compliance Real estate and Titles Voting

Concerns? Regulatory concerns Environmental concerns Over speculation The unknown?

References The Blockchain: Patrick Schmid, PhD, AVP, The Institues http://sandiegorims.org/handouts2017/set1/Theblockchain.pdf Bitcoin White Paper, Satoshi Nakamoto https://bitcoin.org/bitcoin.pdf Insurance Journal 1st Reinsurance Product heads to Blockchain https://www.insurancejournal.com/news/international/2017/06/09/453984.htm Business Insurance Article about blockchain for WC http://www.businessinsurance.com/article/20180518/NEWS08/912321394/Blockchain-will- have-major-role-in-workers-compensation-transactions-says-Paul-M EY news Insurwave https://www.ey.com/gl/en/newsroom/news-releases/news-ey-worlds- first-blockchain-platform-for-marine-insurance-now-in-commercial-use Nationwide Blockchain https://www.insurancejournal.com/news/national/2017/12/27/475346.htm Blockchain Explorer https://blockexplorer.com/ Funny Video https://www.nbc.com/late-night-with-seth-meyers/video/bitcoin- commercial-what-is-it-and-how-does-it-work/3640247