In June 2019, the CRO (Chief Risk Officers) Forum, published the “Insurance and distributed ledger technology – a risk manager’s perspective” white paper as a practical tool for risk managers to accelerate the accomplishment of the productive phase of DLT.

For this podcast we are joined by Dr. Sebastian Rath, Principal Risk Officer at NN Group, and with Gian Luca de Marchi, CRO at Unipol Group. Sebastian and Gian Luca aren’t here on behalf of the CRO Forum but are pleased to discuss their views on DLT while sharing some of the CRO Forum DLT paper content.

 
What is blockchain?
A distributed ledger can be considered as a database that is distributed across several independent computing devices where changes to data are protected and manged by cryptography and consensus. This in turn provides guarantees that the data cannot be tampered with and that all parties have identical copies that can be considered as a reliable single source of truth.

The functionality of a distributed ledger system can be enhanced by the use of smart contracts (i.e. computer programs deployed and executed on the ledger’s network) and oracles (i.e. data feeds that trigger specific conditions defined within smart contracts).

 
What is the CRO Forum?
The CRO Forum was formed in 2004 to advance risk management practice in the insurance industry. CRO Forum member companies are large multi-national insurance companies whose members are headquartered across the world with a concentration in Europe.

The CRO Forum has three core aims:

* Championing best practice in risk management to advance business,
* Aligning regulatory requirements with best practice in risk management, and
* Providing insights on emerging and long-term risks.

The CRO Forum aims to share its views on topics related to these aims through publications and papers. In this context, the DLT paper was created by a working group of hands-on risk and technology experts from multiple member companies, including NN Group and Unipol Group.

 
What is a Chief Risk Officer and what are their responsibilities?
Basically a Chief Risk Officer, the CRO, is an executive responsible for identifying, measuring and addressing any material risks that could have an impact on company objectives. Adverse events should be mitigated, while opportunities should be enhanced. According to the Solvency II regulation, when insurance companies calculate their own solvency position through internal models approved by supervisors, CROs are also responsible for the design, implementation and management of these models.

 
The CRO Forum’s white paper on DLT
Hype has surrounded Distributed Ledger Technology and especially blockchain over the last few years since the birth of the Bitcoin cryptocurrency.

Hype, and criticism too, have been fuelled by fervent visions as well as misconceptions. These technologies have not yet delivered on promises, but several experts believe that DLT has the potential to transform the financial services sector. CROs are well positioned to play a critical role and strengthen innovation initiatives; the CRO Forum paper is thus meant as a practical tool for ...