Suffering from “blockchain fatigue”? If so you may have missed the announcement that UK based ChainThat received “multi-million dollar” funding last week from Xceedance. Or maybe you just dismissed it as another example of how we are charging towards the peak of blockchain hype cycle.
ChainThat may have minimal revenues and few clients but the less cynical may welcome this as another reason to believe that we will be seeing blockchain technology adding real value to insurers in less than 12 months. A lot faster than many had expected.
Why the investment?
I spoke to Dave Edwards, CEO of ChainThat and Justin Davies, head of EMEA for Xceedance earlier this week to find out what had brought them together.
Dave Edwards first recognised the potential benefits that blockchain could bring to streamline risk transfer between insurers and their partners back in 2013. He was working with business processing company Xchanging (now part of DXC), looking to improve the archaic and costly processes used for exchanging data in the London Market. Within a year he had founded ChainThat, bringing with him a team of insurance technology experts.
Dave had a clear view of where they could help the market but it’s been a tough couple of years self-funding the business. The founders’ confidence in their vision was reinforced by an early success, working with SCOR to build a technical accounting blockchain proof of concept as part of the Ruschlikon initiative. The video is a worth a look.
ChainThat have come close to winning some significant blockchain projects, but with no funding in place they struggled to convince potential clients of their ability to provide the scale to support what could become industry changing initiatives.
Industry blockchain consortia: steady but ready
Dave is a supporter of the various consortia such as B3i exploring blockchain implementations. Although these large consortia have to move more slowly, he sees large benefits from taking the time to reach global agreement on standards.
The number of companies joining the two main consortia has grown significantly in the last few months. B3i announced an additional 23 participants in October bringing the total number of re/insurers and brokers to close to 40. In May, R3, which is primarily focused on banking and settlements, announced that it had raised $107 million of investment from 40 companies out of its 70 members. Participants in both consortia are generally reluctant to discuss details about their individual blockchain projects but expect to see more announcements about real business solutions in the next few months.
Boston based Xceedance’s investment is a dramatic move for a company that has only been around for four years and until now mostly known for its managed services business. The company has been keeping a close eye on the new technology emerging around Insurtech and has branched out into strategic consulting. Justin Davies explained they had been looking for a partner that had the experience and skills to deploy working blockchain solutions into the market place: “ChainThat had deep domain expertise and a great team. They are very passionate about new technology with great ideas for use cases.”
Xceedance has close to 1,000 people and recently hired a head of Data Science. A recent project used machine learning to identify actions their client could take reduce the number of manual underwriting referrals, leading to meaningful cost savings. Xceedance doesn’t name its clients, but I’ve come across a handful of leading global re/insurance companies that are working with them.
Next April: open platform, end to end solution
The first project that ChainThat will be tackling is a more efficient way to offer facility solutions to the market. The solution will include integration to settlement and potentially payments. They will be using the Corda open source distributed ledger platform recently released by R3, and the enterprise version when released. ChainThat will also be supporting two of the other major blockchain platforms, IBM’s favoured Hyperledger Fabric and Ethereum. Plans are to move from pilot to full implementation for their first major project by April next year.
Moving beyond the hype: reality in sight
Even battle-hardened skeptics, frustrated by the pace of adoption by insurers, are now beginning to have confidence that the industry can move fast when it needs to. Robin Merttens, co-founder of Instech London is encouraged by the ChainThat investment “Until recently I had thought that it would be 3 – 5 years before people would start taking blockchain seriously. Now I think we might see meaningful implementation next year.”
Robin is particularly enthusiastic about the Maersk marine platform blockchain initiative being developed in conjunction with EY, Guardtime, MSAmlin, XL Catlin, Accord and others. “When we see a major customer for many insurers starting to demand a better way to bring the risk closer to the capital then I start to get excited.”
Craig Polley, Director of Digital Risk Services and Partner at LimeStreet Digital Partners, has been exploring blockchain since 2015. Craig’s familiar with many of the use cases applicable to risk-transfer verticals and markets. I asked him what he thought of the news. “I am really chuffed for the team behind ChainThat. This is what I originally envisioned as an ideal use case; syndicated risk placement and insurance contract execution. They are going for the market that most needs simplification and efficiency improvement, starting with the complex end of the industry.”
How much exactly?
Justin wouldn’t be drawn on quite how many “multiple millions” the deal was worth. Dave Edwards is happy to have enough funding to get a robust blockchain infrastructure in place to solve some real business challenges for insurers and support ChainThat over the next 3 years. Having a trade investor that is looking to the long-term should overcome the problems that many start-ups encounter of getting stuck at the POC stage. Lack of funds, commitment, or clear ownership from potential clients can throttle good ideas at this stage. With funding secured and experience of the London Market, ChainThat looks ready to grab the rapidly emerging opportunities.
Finally, should ChainThat get involved in a marine blockchain platform in their future projects they will be in good hands. Xceedance founder Arun Balakrishnan set up Berkshire Hathaway’s India operations before starting the company. Earlier in his career he was a navigation officer for Seaarland Shipping managing the operations of tankers and bulk carriers.
Matthew Grant is a founder of Abernite and partner with Instech London. He works with some of the best data and analytics organisations and their partners.
This commentary originally appeared in Matthew Grant’s LinkedIn Pulse post.