Tokio Marine & Nichido Fire Insurance and NTT DATA Corporation have completed testing the first blockchain based insurance policy for marine cargo insurance certificates. These insurance policies are forwarded by and shared among parties concerned with a trade, along with other shipping documents such as bill of lading and commercial invoice.
Trade finance and supply chain management is one of the many areas of cumbersome complexity that innovation departments hope to digitally synchronise on shared ledgers. The majority of shipping documents used in global trade are still paper-based; possession of the physical document means custody of the assets. The use of blockchain technology can allay fears that important documents can be duplicated, in the same way that Bitcoins on an open network cannot be copied and spent twice: every participant on the network keeps a computerised record of all transactions, removing single points of failure. In the case of supply chain, this has added optimisation benefits by keeping all parties updated as to the work-flow of the trade, making everything run faster, more efficiently and working out much cheaper.
Tokio Marine said its proof of concept created a "data" bill of lading, letter of credit and a commercial invoice on a blockchain, and tested this from the perspective of a shipper that needs a certificate of insurance in order to satisfy the insurance requirement on the letter of credit. The system imported the necessary data from the "data" bill of lading, letter of credit and a commercial invoice to create a certificate of insurance.
According to Tokio Marine, the blockchain based system dramatically reduced the shipper's data inputting work load, compared to the current web-based insurance certificate issuing system. "It was actually proven that the blockchain based system will cut 85% of the shipper's time of data inputting work in order to receive an insurance certificate. It was also tested in terms of accessibility from the parties concerned, such as consignee and banks," said Tokio Marine in a statement.
The test included "a malicious revision to the blockchain data" to see how the system could deal with attacks. It performed successfully, said Tokio Marine. "When one block was attacked and rewritten, the tampered block was not distributed to other nodes and it became obvious that there was inconsistency compared to the other nodes. It also showed that the whole blockchain system still worked with the legitimate data even though one node was attacked," it said.
Now that the insurance component of international trade has been operationally proven on a blockchain, NTT Data has its sights on more in the way of trade finance optimisation. Apparently, an international blockchain trade consortium is in the making involving shipping companies, freight forwarders, banks, and insurers.