The industry’s blockchain project, B3i, becomes insolvent and ceases to trade

The industry’s blockchain project, B3i, has ceased operations and filed for insolvency after unsuccessful funding rounds.

“The boards, after consultation with the shareholders, have collectively concluded that there was insufficient support to continue with the investment at this stage,” says an announcement on the company’s website.

“I think it was a high-quality effort, but ultimately we didn’t see the volumes in demand” that would justify continued investment in this platform, said John Dacey, group finance director for Swiss Re. which was an original investor in the B3i initiative.

“Conceptually, I think it’s still a very interesting opportunity for the industry. It may be that at some point someone breaks the code, but at this point with this platform, it didn’t seem like it was going to move forward in a profitable way,” Dacey said during a Swiss Re media call to discuss the results from the first half of the year.

B3i, which stands for The Blockchain Insurance Industry Initiative, began life when five insurance companies and reinsurers came together in 2016 to explore the potential use of distributed ledger technology, informally known as blockchain. The original consortium consisted of five insurers Aegon, Allianz, Munich Re, Swiss RE and Zurich, which in 2017 was joined by a further 10 companies: Achmea, Ageas, Generali, Hannover Re, Liberty Mutual, SCOR, Sompo, RGA, Tokio Marine and XL Catlin (now AXA XL). Willis Towers Watson was also a member of the strategic advisory board.

In 2018, B3i formed a company called B3i Services AG in Zurich, which was backed by 20 major re/insurance investors by 2020.

During Swiss Re’s media briefing, Christian Mumenthaler, CEO, speculated on one way the blockchain could be successful.

“We need an end-to-end view,” he said. “It will require all insurers to basically create smart contracts at the beginning, at the origin.”

And then based on that, a digital reinsurance contract could be created afterwards, which would create full end-to-end efficiency, Mumenthaler added.

The problem, he noted, is that all insurance companies have to change IT systems to be able to create smart contracts.

B3i tried to improve the interface between insurers and reinsurers, but not on the original risk, for end-to-end contracts.

“You just don’t get the efficiency you need if you just start with it,” Mumenthaler said.

Insurers and reinsurers who invested in B3i had hoped that blockchain technology used in insurance transactions would help reduce costs and contract uncertainty. An example that was often cited was the case of the September 11 terrorist attacks. The coverage for the World Trade Center had just been agreed, but the paperwork was not ready when the planes hit the towers. Years of legal proceedings followed.

If blockchain solutions had been available and the policies had been entered into one common, underlying ledger where both parties’ acceptance could have been verified, then the lengthy legal wrangle could have been avoided – or at least that was the working theory.