LONDON (Reuters) - Consultancy EY, data security firm Guardtime, Microsoft and ship operator Maersk have joined to build a blockchain-based marine insurance platform that will be the first real-world use of the nascent technology in the shipping industry.
EY and Guardtime said the platform had already been built and would be deployed in January, when A.P. Moller-Maersk, which was part of a 20-week trial of the new platform, would start using it for some areas of its business, along with insurers MS Amlin and XL Catlin.
A near decade-long slump in segments of the global shipping industry has led many companies to seek ways to cut costs and curb pressures on working capital.
The container shipping sector - which Maersk dominates - has been among the worst-hit, due to an oversupply of vessels and worries over global demand, pushing lines to find greater cost efficiencies.
Shaun Crawford, EY’s global insurance leader, said the 400-year-old marine insurance sector was one of the most inefficient areas of the insurance industry. Shipping companies pay $30 billion in premiums paid annually.
Blockchain works as a tamper-proof database that is shared and updated across a network in real time. It can automatically process and settle transactions via so-called “smart contracts” using computer algorithms, with no need for third-party verification.
It has been touted as a potentially revolutionary technology in many fields including financial services and healthcare. But it has so far not been used much outside cryptocurrencies such as bitcoin, where the technology originates.
“The significance of this from my perspective is this is the first real enterprise use-case for blockchain,” said Mike Gault, chief executive of Guardtime, an Amsterdam-based company.
Gault said the blockchain was “absolutely essential” for this platform to function, as it was able to guarantee that all parties - from shipping companies to brokers, insurers and other suppliers - had access to the same database, which could be integrated into insurance contracts.
“Insurance transactions are currently far too tedious and frictional,” said Maersk’s head of risk and insurance, Lars Henneberg, in a statement. “Blockchain technology has the potential to facilitate the desired development that is long overdue.”
The platform is built on Microsoft’s Azure cloud-based technology.
International insurance industry standards body ACORD and advisory firm Willis Towers Watson also collaborated on building the platform.
Reporting by Jemima Kelly; Additional reporting by Jonathan Saul; Editing by Cynthia Osterman
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