| Existing Process | New DLT Platform |
|---|---|
| Administration systems are managed separately by each party | Administration systems are shared by all parties |
| Data is at risk of loss or breach because it is exchanged via email and data rooms | Data is highly secure because it is immutably recorded directly in the distributed ledger |
| Auditing historical data is very difficult, if not impossible, depending on the period | Data is easily auditable over the length of time |
| Interacting with multiple systems requires complex processing and is labor-intensive | Flexible connectivity via open APIs allows seamless systems integration |
Client
The client is one of the largest providers of retail life insurance and investment management services in the UK. Specializing in the reinsurance of annuities, particularly in the pension risk transfer space, the company operates in the U.K., the Netherlands, Ireland, and Canada. In pension risk transfer, an insurance company guarantees the payment of pensions by issuing lifetime annuities to pension beneficiaries. As a reinsurer, the client takes on part of these pension guaranties. The company aims to achieve global leadership in annuities.
Challenge
The administration of reinsurance contracts is highly complex, involving labor-intensive, manual processing and review by numerous parties under complicated business rules. These parties include insured pension funds, insurance companies that take on the first layer of pension risk, and reinsurers supporting them. A given pension risk transfer transaction may involve multiple insurers and reinsurers.
Pension risk transfer reinsurance contracts can last up to 50 years or more, requiring all parties to maintain separate versions of the same data sets for the entire duration. The lack of contract automation software made this process inefficient, relying on monthly data exchanges between the client and its counterparties via emails and data rooms, with each party performing its own calculations on these data sets. This process is highly inefficient, and any errors are compounded over time because of the difficulty, if not impossibility, of tracing changes made years ago to identify who made them and why.
Solution
The client recognized the need to modernize its processes and solve these challenges. They looked at several potential solutions, including off-the-shelf software platforms, but none of them could solve all aspects of the challenges faced. For instance, they considered centralized databases with APIs, which worked well for bilateral transactions but became less efficient as the number of parties increased. Eventually, Distributed Ledger Technology (DLT) was found to be the only technology capable of securely and immutably storing data and interactions across multiple parties over a 50+ year period.
The client chose DataArt as its technology implementation partner because of DataArt’s world-class DLT expertise and its ability to quickly develop a proof of concept to demonstrate value. Moreover, DataArt’s expertise in contract automation software and smart contract solutions was instrumental in designing, building, and deploying the pension risk transfer DLT platform in partnership with the client, allowing it to manage its long-term pension risk transfer contracts on the blockchain.
The table below compares the existing process with the new DLT platform.
Highlights
Streamlined Contract Management Through Blockchain Smart Contracts
The DLT platform replaces manual processes with smart contract solutions by creating a blockchain network of all contracting parties and moving all contracts onto the network. The contract terms are embodied in code, enabling rapid contract execution and automatic reconciliation of transactions.
«Single Version of the Truth» for Multiple Parties, Immutable and Traceable Over Time
The new DLT platform, enhanced by contract automation software, enables private and secure peer-to-peer communication and data exchange with all parties maintaining a copy of the ledger. Any change in contracts can be viewed by all parties and traced over any period. Network participants agree on all data, signing digitally and cryptographically, which creates a «single version of the truth» built on perpetual consensus without the need for a centralized authority. The history of a transaction becomes secure, immutable, and entirely transparent over the life of the contract. Of course, the platform complies with all applicable regulations.
A Highly Customizable Platform
By customizing pre-coded templates, smart contract solutions allow users to quickly create contracts tailored to specific terms and business rules, reducing reliance on the technology team.
Benefits
Solution Highlights
Offering unprecedented transparency and security in a highly interconnected market, the contract automation software platform is intended to be open to many of the client’s counterparties and is already live with one insurance company.
DataArt initially created a successful PoC on the Corda blockchain platform.
Once the PoC was approved by the client, DataArt built the first smart contract between the client and an insurance company on Hyperledger Fabric. DataArt manually deployed AWS infrastructure to support the Hyperledger Fabric blockchain network, including installing software, creating and managing certificates for access control, and configuring networking components.
For all subsequent smart contracts, the team adopted Amazon Managed Blockchain (ABM), which runs in the cloud as a managed service. Using AMB allowed the team to set up, manage, and invite partners to the new blockchain network faster and with lower cost and complexity than deploying the foundational infrastructure manually, thereby enhancing the scalability of the platform.
The project was carried out by eight software engineers, a business analyst, and a team of quality assurance engineers.
