Insight Report

Securitized Insurance over Blockchain

May 2021

The Opportunities and Challenges of Decentralized Coverage

Blockchains are transforming the ways that we transact value and handle data. This disintermediation of financial services, or DeFi for short, extends to insurance—reimagining underwriting, claims, and insurance companies altogether.

However, blockchain-based insurance products thus far have known limited uptake in the market. In many cases and against expectations, they have proven not less but more expensive in relation to each unit of coverage.

This report describes insurance-linked securitization (ILS) and explains its real-world implementations. The effort to use blockchain to expand the gamut of such instruments will not likely succeed unless the technology’s capacity for disintermediation and automation can be combined with other standard features of regular insurance, especially diversification and the indemnification of claims.

This report explores various scenarios and examples to demonstrate the conditions under which securitized insurance over blockchain can compete against conventional offerings.


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