About RiskStream
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First Things First: What Is Enterprise Blockchain?
Blockchain technology continues to be a hot topic in the news. From cryptocurrencies to enterprise blockchain, to non-fungible tokens (NFTs), blockchain has shown it can work as a means to share value in tumultuous times and generate new methods to track digital ownership. Now it’s starting to show signs of helping with multiparty business processes and the divergent roads of enterprise blockchain and public blockchain are beginning to merge. Enterprise blockchain usage in insurance is expected to increase in the next few years and has a bright future.
Increasing operational efficiency is a goal of all companies and the special sauce of enterprise blockchain (also known as private permissioned blockchain). The usage of enterprise blockchain is quite different from cryptocurrency or public blockchain projects in that the underlying protocol is generally not public; it’s a private, permissioned network of organizations (not people).
Commonly with a private permissioned blockchain network there are rules for which parties can set-up a node and be involved in the network’s shared version of the truth associated with decentralized system of data exchange. This is why it’s often referred to as “enterprise blockchain.”
The level of transparency and flexibility within a private permissioned blockchain network are some key areas of consideration to ensure world-class security and privacy, which is paramount for network success. Given the effort associated with enterprise blockchain, start-ups within the space are often considered deep technology in that they aim to provide technical solutions based on large scale, scientific or engineering challenges. In this case, business cooperation.
As with all efforts of great magnitude related to deep technology, there are challenges. But there are also opportunities and tools to overcome those challenges. The challenges in implementing enterprise blockchain are generally related to factors we can put into three large groups:
Business Network and Network Operations
Enterprise Blockchain Platform
Decentralized Apps
Business Network and Network Operations
Business Network and Network Operations
Within the network a universe of businesses that could participate as nodes on the platform. Outside of the direct network, a universe of business that can work with the network but may have different privileges.
Due to this move, consulting firms are no longer leveraged by RiskStream to support development of the Canopy platform or its applications. Having components open-sourced reduces license costs. RiskStream works with Kaleido on development, which is low cost since existing Web3-oriented modules, scripts and tools can be spun up easily on the platform — keeping the overall costs down. The movement to a SaaS framework/platform approach with RiskStream’s development partner (Kaleido) has allowed RiskStream to concentrate on network expansion and application design and reduce overall fees for application build and run.
Enterprise Blockchain Platform
Enterprise Blockchain Platform
There are a variety of enterprise blockchain platforms and frameworks. Each has a system where certain parties decide to stand up nodes and act as validators to use applications.
What Is RiskStream?
The Institutes RiskStream Collaborative (RSC) was formed over five years ago by The Institutes. It is the risk management and insurance industry's largest enterprise-level blockchain consortium. RiskStream serves the industry as a neutral, collaborative, and non-profit resource, focused on solving multiparty business process challenges. RiskStream has engaged with over 150 carriers, brokers and reinsurers over the last year. The Institutes goals in starting this consortium were threefold:
Develop a governance model for an emerging membership network that allows industry competitors to cooperate on transformative multiparty business processes in a way that emphasizes efficiency, compliance, and fairness.
Develop and enhance an industry utility (Canopy) that provides a nexus and platform for developing decentralized technology solutions, which can uniquely solve long-standing industry problems in a cost-effective way for members.
Assist with and propel the creation and adoption of applications (apps) by the consortium, or by members, who wish to develop their own proprietary apps on the platform.
Decentralized App Development: RiskStream’s Exploration, Labs, and Production Process
Phase 1 — Kick-off Phase
Open to the entire industry, both RiskStream members and non-members. The goal is to discuss the use case’s business problem and collaborate on designing a multi-party business process solution using blockchain technology. Over the last year, more than 150 non-member firms (carriers, brokers, or reinsurers) were involved in RiskStream Labs Phase 1 sessions across initiatives within Surety Bonds, Commercial Auto, Life & Annuities and more. Sessions are generally once a month for several months.
Phase 2 — Proof of Concept
Participants from Phase 1 determine if they want to self-fund a proof-of-concept (POC) application to be built on RiskStream’s Canopy platform for that specific use case. A threshold POC development cost is established with the development partner, Kaleido, and RiskStream works with participants to self-fund. Members of RiskStream either receive a steep discount or pay nothing, non-members pay a premium, but the overall price is still very reasonable. The design for the proof of concept is worked on with participants over 12 weeks, with a testable product delivered at the conclusion.
Public Blockchains
Are open and permissionless. Any person with internet access can send transactions. Any person with the right hardware can set up a node on a decentralized system. The nodes can then act as a validator (i.e., a participant in execution of the programmed consensus protocol across the network). Most of the public blockchain network protocols offer economic incentives for those nodes that participate. Most cryptocurrency and NFTs leverage public blockchains.
Blockchain Node
What is a node in blockchain? A blockchain node is a device, usually a computer, that participates in a blockchain network. It runs the blockchain protocol's software, allowing it to help validate transactions and keep the network secure.
Enterprise Blockchain
Nodes are private and permissioned. These networks are not public, so it is not possible for ‘any person’ to send transactions or participate as a node in the network. Instead, access to network participation is limited, commonly to a specific group of ‘businesses’. For example, RiskStream’s consortium creates a universe of parties (i.e., insurance carriers, brokers and reinsurers) that can gain access to RiskStream’s Canopy platform to participate as a node on Canopy’s private permissioned (or Enterprise Blockchain) network.
Enterprise blockchain allows network participants the ability to integrate blockchain nodes to existing core systems; for example, an insurance claims or policy system. The private network ensures only parties relevant to the core mission can be onboarded to the network. The permissioned aspect allows participants the ability to share or verify information from one integrated core system to another in the case of certain events. There are many multiparty business processes within insurance where this can be useful.
In the Business Sense, Deep Technology Has Three Key Attributes:
Potential for radical disruptive impact and new markets.
A longer time to move from basic research to market-ready maturity.
Substantial requirement for capital largely due to life-cycle of deep tech.
Decentralized Applications
Business Network and Network Operations: The RiskStream Collaborative
Through the business network, insurance carriers, brokers and reinsurers can join the RiskStream Collaborative as consortium members. RiskStream has over 30 members involved in the consortium and has engaged with over 155 non-member carriers, brokers and reinsurers setting up a funnel for membership in 2023. According to RiskStream’s Business Network Operations Policy , RiskStream members can stand-up nodes, integrate their company node to core systems (like a claims system) and interact with the secure, private permissioned business network though RiskStream’s blockchain enabled platform, which is called Canopy.
RiskStream has recently extended the membership concept to include entities outside of carriers, brokers and reinsurers. These “associate” members, also have network rights, but those rights are not the same as carriers, brokers and reinsurers. The associate membership category consists of industry non-profits, governmental entities (regulators, departments, etc.), providers (core systems providers, solution providers, insurtech start-up application developers, etc.) and industry collaborators (for a personal auto use case this could include glass repair shops, rental car companies, banks, etc.). These associate members don’t have the same rights as full members, but upon approval by RiskStream governing bodies (comprised of carriers, brokers and reinsurers) they can stand-up nodes for certain applications.
Blockchain Platform: Canopy
Various models for enterprise blockchain frameworks have been leveraged by the insurance industry. Many have leveraged consulting groups to design and build the solutions and/or develop the platform/framework itself. While these groups are very knowledgeable and tend to propel initiatives forward, interactions can be costly and it is possible they may have incentives to advise to develop new platforms, rather than leveraging off-the-shelf models.
RiskStream has worked with many technical solution providers over the years, but with Canopy 3.0 has moved to an off-the-shelf, SaaS model. Currently, RiskStream works with a blockchain business cloud provider, Kaleido, to develop and enhance an insurance-specific enterprise blockchain platform, called Canopy, and build decentralized applications on the platform that can streamline the sharing and verification of data within insurance. Canopy allows each RiskStream member to stand up blockchain-enabled nodes, which can be integrated to core systems (policy or claims systems, for example) to enable data exchange and verification for specific use cases or applications.
The Canopy framework is on its third iteration and is complete. A key component of this Canopy 3.0 framework, is Hyperledger Firefly, which is open-sourced and built to allow off-chain data sharing, working with a variety of underlying enterprise blockchains. This framework also has off-the-shelf tools for privacy, digital assets that can be stood up quickly and operate with optimal security across regions.
Decentralized Applications
Decentralized applications are built for business purposes of the network participants on the platform. The goal is often to make multiparty business processes more efficient.
The Institutes
The Institutes are a 501c3 non-profit organization with a history that stretches back more than 100 years. According to their website, The Institutes “seek to make a difference in society and in the lives of individuals, families, and businesses by providing knowledge, education, resources, thought leadership and global collaboration on risk management and insurance. Best known for professional development and credentials, they educate over 100,000 insurance professionals annually. They have a board of 50 CEO-level individuals that represent most of the domestic premium volume and assist The Institutes in providing services across a variety of affiliate organizations. The concept for forming The Institutes RiskStream Collaborative as a separate 501c6 non-profit was supported by The Institutes board because they felt The Institutes were a logical, neutral third-party to leverage a network-based technology, like blockchain, to help enterprises within risk management and insurance streamline multiparty business process challenges.
RiskStream solutions and applications typically involve cross-party data sharing and verification from member’s integrated system of record, using Risk Stream’s private permissioned blockchain platform (Canopy). RiskStream members, which are carriers, brokers, and reinsurers, lead all areas of the consortium’s activity and governance through boards, committees, and application-specific working groups. Insurance member companies and leadership work with RiskStream staff to prioritize use cases across sectors and launch working groups to design solutions for various multiparty business process challenges. These working groups are facilitated by RiskStream product managers.
RiskStream aims to provide the industry with three key elements: a business network and network operations (The RiskStream Collaborative), a robust enterprise blockchain platform (Canopy) and various decentralized applications (RAPID X, Mortality Monitor, etc.).
RiskStream’s Canopy platform is not tied to one specific enterprise blockchain or network. It’s network is based on the RiskStream consortium of member carriers, brokers and reinsurers. This network can operate with any underlying enterprise blockchain, including Quorum, Hyperledger and Corda. This flexibility, leveraging Canopy and its off-chain capabilities, allows RiskStream to develop applications very efficiently on the platform.
Security and privacy are top of mind for carriers, brokers and reinsurers. Any blockchain solution or platform leveraged by the industry has to ensure world class security and privacy. The RiskStream Canopy platform is SOC2 and ISO certified. It leverages off-chain capabilities to ensure compliance with GDPR and CPPA, ensuring that private data is handled very rarely and when it is, is never stored on an immutable ledger. A newer feature, explored later in the board book, is Canopy’s ability to interact with public blockchains.
Decentralized Applications: Many (RAPID X, Morality Monitor, etc.)
The Institutes RiskStream Collaborative has primarily been focused on the domestic US market and has designed solutions for private passenger auto, commercial auto, surety bonds, life and annuities, reinsurance and other areas. RiskStream has explored new blockchain technologies (through RiskStream Explores), worked with the industry to source new use case concepts, and worked with member-led advisory groups to prioritize, launch and execute new working groups for specific use cases. RiskStream’s product design and development approach is explained in its Exploration, Labs and Production Process.
Phase 3 — Pilot
This is an optional phase. RiskStream’s Advisory Groups provide advice on whether POCs that are completed in Phase 2 will move beyond to Phase 3 or straight to Phase 4. At this point, membership is a requirement to engage in working sessions, testing, and node set-up.
Phase 4 — Production build
During the production build phase, development of the production variant of the application takes place. Individual business cases for the application are published and reviewed. Production nodes are stood up. Security is reviewed with internal teams. The production-hardened application is tested by members and integrations into core systems are also tested.
Phase 5 — Adopt and Run
RiskStream works with interested members on adoption plans. This may include contracts, run fee and early adopter incentive reviews and discussions. Early adopters begin running production transactions through the Canopy platform for that specific application.
Within its pilot and production phases, RiskStream has developed a process for individual testing and cross-testing applications and has worked with members to create industrywide and company-specific business cases for application adoption. The cost to run applications has a cost-efficient funding method. For applications close to production, early adopter incentives are established to ensure the first adopters are rewarded by the network with late entrants receiving no such benefits.
For the RiskStream network, consortium-oriented applications keep the IP with RiskStream. However, it is possible for a proprietary application to be built on RiskStream’s Canopy network by a carrier, broker, or reinsurer and for that organization to maintain IP.