“CAPTIVES COULD CONSIDER EXPLORING THESE INSTRUMENTS
WHEN OFFERED BY REGULATED ENTITIES.” MELANIE SNYMAN, PWC
cayman captive 2019 31
which are backed one-to-one by a fi at currency or a commodity of value
such as precious metals,” he says.
“Some of the most recent stable coins are seeking to be fully regulated.
The intention is to reduce the volatility experienced in cryptocurrencies
such as bitcoin and therefore make them a more feasible currency for
Blockchain and cryptocurrency uses
The benefi ts of distributed ledger technology are many, and a number
of companies in the insurance and captive insurance markets are
developing business models that incorporate cryptocurrency and
blockchain in some way.
In 2017, Allianz Global Corporate & Specialty successfully implemented
a blockchain prototype that looks at three common process fl ows in the
captive insurance cycle: annual policy renewals, premium payments
and claims submission and settlement. It translated these processes
into the distributed ledger environment, decreasing the time from start
to policy, policy to premium and claim to settlement.
Shipping giant Maersk uses its Denmark-based captive Maersk
Insurance to provide comprehensive insurance coverage for its fl eet of
ships, and in 2018 started using blockchain platform Insurwave for its
marine hull portfolio.
Distributed ledgers such as these can be used in conjunction with
real-time data to track the movement of physical marine assets such as
ships and containers, and provide a record of real-time changes.
Cayman insurers have started using drones to capture real-time
evidence of incidents, which Snyman says provides more detailed,
accurate, timely and almost irrefutable evidence that feeds into the
claims review process.
“With this level of electronic evidence already available in real time,
there is opportunity for sharing data at similar speeds with all parties
involved in the claims process, in real time. It can be argued that
distributed ledger technology opens the door for this level of effi cient
collaboration along with the internet of things and artifi cial intelligence.
“It is not surprising that some companies are exploring the blockchain
use cases to create a whole revenue stream by either targeting a
different type of investor or automating existing service lines,” she
She also notes that some captives reinsure other insurance
companies that use blockchain technology in insuring customers for
travel insurance (using smartphones to log claims on a real-time basis).
In terms of cryptocurrency, Gumeyi provides interesting uses cases
that have the consumer experience as the focus.
One such example is fl ight delay insurance, where customers signs
up for a policy via an app on their smartphones. The insurance terms
and conditions are recorded on a smart contract, and then can trigger
payment to the policyholder via the blockchain based on an external
feed from the airline of a fl ight delay.
“Some utilise the Ethereum blockchain, so payments are made
in Ethereum’s cryptocurrency (ETH) but could be expanded to other
cryptocurrencies; others however, make payouts directly to the
policyholder’s bank account,” says Gumeyi.
“As some airlines already accept bitcoin, there could also be
opportunity even for the insurer of the airline to receive premiums in the
Another area Gumeyi suggests is crowdfunding for mortgage lending,
where loans are tokenised and recorded on the blockchain. Loans are
insured and passed on to a reinsurer, both of which have access to
the ledger—the token can then be exchanged for other crypto-based
Beyond these use cases, Snyman suggests there are potential
investment and and capital benefi ts for captives that use
“Outside of traditional investment securities, captives have traditionally
invested in vehicles such as mutual funds and hedge funds,” she says.
“With the advent of investment vehicles linked to crypto/blockchainrelated
businesses including in the exchange traded funds (ETFs)
space, captives could consider exploring these instruments when
offered by regulated entities.
“This would be best conducted after evaluating the company offering
the products (eg, governance structure, geographical location as well
as applicable laws and regulations, fees, etc) and reviewing the market
to determine the funds to be allocated and to effectively manage the
“The benefi t would be the potential to gain from cryptocurrency growth
from a basket of stock, while minimising the risk of investing in individual
If regulatory acceptance is achieved, Snyman says, there could also be
a role for cryptocurrencies to raise capital for non-traditional risk facing
vehicles. She warns that there is a cost associated with developing the
infrastructure that would support crypto-based transactions, and that
publicly available platforms have their own set of risks and exposures.
“If captive insurance companies take the use of this emerging
technology as a slow evolution as opposed to an overnight revolution,
they will be better able to design business case strategies that are more
aligned to their strategic goals,” says Snyman.