This is a guest opinion post by Bob Crozier from Allianz Technology SE, where he is Chief Architect, Head of Enterprise Architecture and Head of Global Blockchain.
This year, 2021, was a tipping point for enterprise blockchain in the insurance space. Scaled products went into full production, delivering millions of Euros of value, either in cost savings or new revenue, for primary insurers.
As we turn the page on this year and look to 2022, I see several similarities to 2018, where cryptocurrencies were coming off the back of All Time Highs. We are in the middle of the peak NFT hype-cycle and the interest from colleagues not closely tied to the DLT space is evident once more.
Like in 2018, 2022 will be the year that serious players will get their head down and build. They will go off and quietly figure out the business value of digital assets and set about the process of bringing it to life in a real and meaningful manner.
Where the insurance world was in 2018, the asset management business is today. They will commit resources to properly understanding the technology and regulatory frameworks are changing to encourage the uptake and exploration of value. I believe the cycle to production will be shorter with the insurance products already deployed giving confidence that ‘the technology works’.
It is great that technology teams of financial services companies get it. However, the real change comes when the business leaders are convinced of the power of the technology in how it can solve their real problem patterns and can see those patterns replicated across their businesses.
Multiplying the advances outlined above, Central Banked Digital Currency (CBDC) exploration will continue at pace with some projects and cross border initiatives already delivering first insights and real measurable results. When CBDCs are combined with Digital Assets enabling Fiat settlement on ledger, then the space will begin to really heat up.
That work will begin seriously in 2022 laying the foundation for scaled value exchange. Indeed, it has already begun in China and we will see the DC/EP digital Yuan come to the fore at the Winter Olympics where, travel restrictions allowing, foreign nationals will be able to sample the digital currency for the first time.
What’s in store for insurance
In the insurance space, we will continue to build out and extend the current product range which is connecting enterprises. From cross-border settlement of claims, for example, we will move into more general settlement of payments, invoices and risk transfers, building on the real value already exhibited by current products. We will see the first large scale legally binding contracts signed ‘on ledger’ still adhering to compliance and other regulations and beginning to set in motion the transformational evolution of the insurance risk transfer business.
As public permissionless chains move towards more environmentally sustainable models, the financial services industry will continue to experiment in this space, although I expect the big players to only get serious when Proof of Stake is fully implemented.
What is the insurable value of a magic cloak or sword that has been earned through effort and money by a player in the metaverse? What risks are likely to befall such a digital asset? How much does it cost to replace? I would expect more big players (in addition to Nike & Adidas) to seriously look at the value proposition of NFTs and other provably unique digital assets. Only by being able to price the risk of these assets will insurers be able to provide products that enable reasonable claims settlement.
In short, 2022 will be a year of more products becoming real value generators and another exciting year for exploration. The blockchain ecosystem continues its exponential growth!