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While many in the insurance community and beyond see great promise in blockchain, also known as distributed ledger technology, they also recommend a prudent and deliberate path forward with no rush to judgment, executives said.
“‘Can it be used for this?’ is only part of the question,” said Patrick Yu, who leads the commercial property/casualty actuarial team in Aon PLC’s San Francisco office.
“Another important question is, ‘Is blockchain the only way to do that thing?’” Mr. Yu said. “There are areas where you could argue that you could use blockchain, but there might be a much simpler, nonblockchain way to accomplish the same thing.”
“The places where blockchain really shines are places where you need to authenticate” identification and activities, Mr. Yu said. “If your use case isn’t necessarily aligned with that, then maybe there’s a nonblockchain way to do the same thing.”
A Vermont pilot program announced in January will use the state’s captives industry to test drive the emerging technology. The program “allows us to get more intimate without making a big investment and allows us to see how the whole blockchain movement shakes out over the next 18 months,” said Michael Pieciak, commissioner of the Vermont Department of Financial Regulation. “It’s important to be engaged with it, but not to oversubscribe yourself.”
“Where there are established methodologies in place that are working, the question is: Does blockchain provide any additional value?” said San Francisco-based Ward Ching, a managing director in Aon’s captives insurance management space division who also consults on alternative risk transfer. “The issue is, does it create a more effective way of transmission? We’re not sure yet.”
Microcaptives continue to come under fire from tax authorities as the IRS aggressively audits captive insurers that take advantage of long-standing rules that allow captive owners to reduce their tax bills.