Daily Fintech’s most popular post from 2018

To give the experts who bring you  insights daily based on their experience as investors, entrepreneurs & executives a break during this holiday season (for some people), we are reposting the most popular posts from last 5 years. Daily Fintech’s most popular post from 2018 was The Blockchain Economy courseware

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Daily Fintech’s most popular post from 2019

To give the experts who bring you  insights daily based on their experience as investors, entrepreneurs & executives a break during this holiday season (for some people), we are reposting the most popular posts from last 5 years. Daily Fintech’s most popular post from 2019 was The battle of Fintech is over, the battle of […]

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Daily Fintech’s most popular post from 2021

To give the experts who bring you  insights daily based on their experience as investors, entrepreneurs & executives a break during this holiday season (for some people), we are reposting the most popular posts from last 5 years. Todays post was the most popular in 2021 but was actually posted late in  in 2020 Should […]

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This Week in Fintech ending 17 December 2021

This week our experts brought you the following insights based on their experience as investors, entrepreneurs & executives. Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at  Kryptonio a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords and Weekly Columnist at Daily Fintech) @iliashatzis […]

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Security Token news for Week ending 24 January 2020

Week ending 17 January 2020 in Security Tokens

Here is our pick of the 3 most important Security Tokens news stories during the week:

One. Silicon Valley Coin by Andra Capital Uses Tezos Blockchain and TokenSoft for Its Security Token Offering

“Andra Capital, a San Francisco based venture capital firm, announced plans to issue Andra’s Silicon Valley Coin (SVC) via a Security Token Offering (STO). Collaborating with the Tezos Foundation, SVC will utilize TokenSoft’s issuance platform and be built on the Tezos blockchain.”

Equity ownership and governance are closely related in early stage ventures, so the use of Tezos is significant.

Two. EMURGO Establishes Strategic Task Force with Uzbekistan Government to Develop Framework for Security Token Offerings & Exchanges

“EMURGO Ptd. Ltd. – EMURGO – the official commercial arm of Cardano blockchain – announces the establishment of a blockchain task force with the National Agency of Project Management (NAPM) under the government of the Republic of Uzbekistan, and alongside advisors KOBEA Group & Infinity Blockchain Holdings, to lead the development of a legal framework for security token offerings (STOs) and exchanges (STXs) in the Republic of Uzbekistan. In addition, EMURGO & KOBEA will advise on infrastructure for digital asset banking & exchange, and blockchain education units, amongst others. EMURGO will provide advisory services to develop the framework and business units with the task force & mutually explore the potential for Cardano’s third-generation blockchain for infrastructure projects.”

Alternative blockchains such as Cardano have to battle the network effects around Ethereum and alternative jurisdictions such as Uzbekistan have to establish themselves in investor’s minds. So expect more partnerships such as this.

Three. GreyP Completes Equity Token Offering on Neufund. Securities are Distributed as Investors Will Also Benefit from Neu Token Distributions & Payouts

“GreyP Bikes (an e-bike company), one of the first “equity token offerings” or ETO to complete a primary issuance on the Neufund platform distributed the digital securities to investors last week. The security offering began last October with a pre-sale followed by a public sale that ended towards the end of November.

As was previously reported in December, GreyP raised €1.4 million from 1017 investors from 34 different countries – . The offering was described as the first IPO every completed on a blockchain-powered platform. The company sold the ETO at a pre-money valuation of €45 million.  Founded by Mate Rimac, who also created Rimac Automobili, GreyP claims the backing of large investors like Porsche and Camel Group.”

We like it when we see issuers who have nothing to do with Crypto/Blockchain as it indicates market traction. It is even better when, as in this case, the issuance transaction close/executes successfully.

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context,  please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

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Blueprint One- a building plan for a Lloyd’s digital/culture change decade, or pie in the culture change sky?

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It’s really a tour de force, the 146 page Blueprint One recently released by leadership at Lloyd’s, a detailed road map for the staff and approximate ninety syndicate players that comprise the firm, its reinsurers, customers, associated MGAs, vendors, brokers and agents.  Plans, flow charts and implementation strategy that are planned for the next two years, with all the new moving parts in synch by close of 2022.  Oh, and did I mention the £35 billion in annual premiums that the organization generates through its stakeholders?  Bold plans for a three-hundred-year tenure organization.  And there is the unmentioned tension- an entrenched business model planning to evolve into an agile, cutting edge tech leader.

Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

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Lloyd’s is the industry standard bearer for specialty risk management, AKA ‘the stuff an underwriter can’t thumb to in his/her U/W manual’.  Its technique and mystique have evolved during the more than three centuries since a few gents sat in front of some pints and pondered financial hedges against loss of shipping cargos.  Why then, does the firm think that several months of research, interviews, participant interviews, technology vendor schemes, and resulting blueprint from Lime St are the best answers to changing the course of the culture and operations of a complex global insurer?

Consider this voice from the street (location to remain unmentioned):

“Sadly, it seems that Lloyds underwriters have developed a degree of contempt for the XXXX market, over the last year I’ve seen the worst performance from certain Lloyds underwriters I’ve ever experienced in the last 20 years or so. In particular, not having renewal terms ready in time when renewal submissions have gone in well on time. It’s definitely a hard market from where I’m standing, and it isn’t particularly civilised either!”

Well, hard markets currently abound for many reasons across the globe, and anecdotal responses are a little unfair.  But the basis of the speaker’s concerns may not be- Lloyd’s is a huge, multi-variate, multi-cultural, global organization that cannot be changed under dictate, singular plan, or silo-driven flow chart.  Underwriters remain subject to the performance matrix of the day, and grand plans from on high take a rear seat when quotas aren’t met, or loss ratios are trending north.  Additionally, the firm remains entangled in aftereffects of sexual harassment accusations, mitigating the perceived impact of an over-arching office culture of suits and club decorum (although well past the days of PFLs), and recent years’ declining profitability.  Can Blueprint One be communicated, integrated and adapted uniformly in the face of these challenges? And can the evolution avoid the strong effects of the “Quarterlies?”

Culture and process changes aren’t new with the advent of Insurtech, innovation, globalization or change of leadership.  Much of what the blueprint discusses has its foundation in technology and transparency across the organization’s depth and breadth.  At its core we are talking insurance, so the topic may be busy, but it’s not rocket science.  Identify risk, understand risk, price risk, hedge risk, service occurrences that confirm risk (claims), and pay less than is taken in.  The firm is smart, therefore, to look to leverage technology for easy inclusion of participants across many regions and many forms of access, easier aggregation of business, more effective application of information, collection of data, and so on.

Consider the Blueprint’s ‘what it is’:

  • The firm’s strategic intent, description of vision.
  • Current thinking on each of six identified solutions-
    • Complex Risk platform
    • Lloyd’s Risk Exchange
    • Claims Solution
    • Capital Solution
    • Syndicate in a Box
    • Services Hub
  • Details of the initial phase of each solution
  • Invoking cooperation from Lloyd’s market players in the firm’s future
  • How and why success will be gained.

That’s on page 7 of the 146 page blueprint; it is an ambitious, wide scale road map.

It’s clear the more complex a plan is the greater the chance of incomplete implementation; the more incomplete or disuniformity of implementation the greater the chance of not achieving success.  The firm has its plan, its foundation for success, if the plan can be implemented.

Skipping forward to “Why we will succeed,” on page 11 , and I chime in with some observations that the principles suggest from other large org’s culture/ops changes:

  1. Capitalize on prior market investments (that’s funds spent previously on innovation).
    • This the “not throwing the baby out with the bathwater” approach. How to include the capital investments of the past few years in how we move forward.  A small anchor on innovative thought?
  2. Learn from the past
    • There are plenty of reorg carcasses along the wayside, let’s figure ways to have innovation not die at birthing. Of course putting the words, “Our collaborative approach to building the Future at Lloyd’s will ensure the solutions are designed for the benefit of Lloyd’s and the wider London market,” are contradictory right out of the box.  Perhaps solutions designed by and for Lloyd’s global staff and customers might sound more collaborative.
  3. Communicate regularly
    • Cascade those ideas from Lime St. to the world.
  4. Ensure the corporation and the market has (sic) the right skills to deliver the plan
    • Collaborators- prepare to invest time and money in change management plans that will be as successful as any change management programs. Can’t buy success.
  5. Deliver value to the market quickly
    • The rollout cannot interrupt business. There are those darn quarterly reports.
  6. Deliver the technology in parts
    • Deliver solutions in parts- of course each discipline needs different starting points; the law of unintended consequences will prevail.
  7. Retain control and operational responsibility (for tech)
    • Autonomy is resolving rollout issues will be suppressed to ensure uniformity. There will be scapegoats.
  8. Ensure the appropriate governance is in place
    • Central control of the collaborative integration. Decision making is the firm’s.

Rather than ramble on I am going to shamelessly borrow some innovation/org change concepts from a Property Casualty 360 article penned by Ira Sopic, Global Project Director at Insurance Nexus that has an apt perspective- “Agility is the key to technology innovation for insurers.”  But let’s build a contrast from Lloyd’s presentation.

Agile?  Can a global, £35 billion insurance giant be agile?  Do Lloyd’s customers demand innovation, or will they benefit materially from innovation?  We can see what the author and Lee Ng, VP of Innovation at Travelers Insurance say.

Fundamentally, the article notes org agility means looking at how decisions are made across an org and making significant changes.  That’s ambiguous until the addition of, “you can’t prove innovation before it happens.”  Uncertainty of innovation’s results can be overdone with analysis.  ‘Agile’ is the opposite of ‘waterfall’, an approach where plans and decisions are made at the top and cascaded down through the org as steps in a process are encountered.  Rolling out comprehensive plans by their nature inhibit iteration- big plans have milestones, have successive designs, benchmarks and schedules.  Agile has ideas, iterative maps, acceptance of failures.  Lloyd’s has established a grand approach to the former method- I kid you not, here’s an exemplar flow chart of planned core technology:

Core tech

Many participants influencing and accessing the tech core of the firm, and those magical skeleton keys to open the doors- APIs and interfaces.

Continuing, agile can be successfully piecemeal- protect the primary ROI factors of the biz, experiment with agile ways of working with collateral functions, build the innovative environment without whacking the quarterlies.  The inherent problem with piecemeal approaches?  They are hard to measure for success, and hard to program into project management software.

Another agile tack to take? “Done is better than perfect’.  Resist the urge to over plan, over measure, and to set expectations that the first attempt is a go or no go for the entire org.  A popular innovation concept applies- try, and fail fast.  Then try again.  There are many vendors who are experts in narrow parts of an org’s innovation path- it’s OK to rely on them.  Investment in a POC or two is as good as implementation.

Perhaps another day will allow discussion of the plans for the six Solutions, particularly Claims and Risk Exchange (the nexus of provision of service and of customers’ expectations from the firm.)  In spite of a skeptical take on the Blueprint I certainly want Lloyd’s to remain the bastion of risk management in a increasing risky world, but the concern is the firm is approaching this insurance elephant as a full take away meal, instead of as tapas.

In closing consider this- if there are five levels of Blueprint implementation and each effort has a 98% probability of success, after the five levels there is an aggregate probability of integration success of 90%.  That’s not bad, unless the interplay of five operational areas serving clients is considered with 90% effectiveness at play- aggregate 59% average Blueprint compliance outcome.

Consider those little bites, Lloyd’s.  The industry is pulling for you.

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Green Home Loans A Reality Downunder

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia

The world must go green. How green is probably a debatable question, but slowly the tide is turning towards renewables and fossil fuel alternatives, with many hard-nosed climate conservatives even beginning to thaw on the issue.

Finance has a huge role to play in this greenification of the world. In Australia, companies like Ratesetter are leading the way in helping consumers access finance specifically to help fund the purchase and/or installation of an Approved National Cl…

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Addressing some symptoms of insurance issues, and not the underlying causes?

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There’s an odd contradiction in some of what the insurance industry does; the industry is built on predicting risk and strategizing risk sharing, yet in many ways it is victim of knowing its own concerns and reacting to and pricing the reaction, and not working to mitigating the effects of the outcomes.  And in at least one case looking to backfill its model to fit corporate strategy and perhaps not customer choice.

 Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

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Backfilling or buyer’s remorse?

Allstate Insurance (US P&C carrier) recently announced its digital insurance brand, Esurance, will be discontinued as part of Allstate’s migration into being an omnichannel carrier where customers have options under one access point/model for agency based or digital insurance acquisition and service.

Looking back to 2011 with Esurance being a $1 billion acquisition by ALL wherein the company’s CEO announced, “Allstate is uniquely positioned to serve different customer segments with unique products and services,” said Thomas J. Wilson, Allstate’s president, chairman and chief executive officer. “This transaction provides immediate incremental growth in customer relationships and makes Allstate the only company serving all four major consumer segments based on their preferences for advice and choice.”

Appears that ALL figures customers in 2020 expect only one access point that will provide purchase options.   Here’s the thing- Allstate had internal rules that inhibited customers from switching agents and/or internal brands, not external barriers; this change will reportedly alleviate the ALL system problem, and empower agents to better serve customers (per leadership and aligned with a previously announced commission decrease) as ALL migrates into being an insurance technology company.  But what of the 1.5 million Esurance policyholders who consciously chose the Esurance model, and may balk at being tied in with the legacy brand?  And, will marketing costs truly be saved if digital customers still need targeted messages?  It’s certain that Allstate’s advertising partners will create a clever omnichannel ad campaign, but legacy brand is legacy brand, and buying culture is buying culture- can ALL be a cleverer digital carrier under the parent name than was Esurance?  Additionally, will rolling the Esurance policies into the parent change how staff handle claims?  Perhaps, but the effects of several years of underwriting losses for the Esurance PIF will not disappear simply because those claim customers are now called Allstate customers.  Would it have been a more direct action to fix the Esurance claim handling issues? And what does this move in combination with centralizing customer service away from agents suggest for the agency model?

 

Maybe a good idea earlier in the finance value chain?

Swiss Re announced this week the placement of US $225 million in parametrically triggered cat bonding for Bayview Asset Management’s MSR Opportunity Fund, covering mortgage default risk for Bayview’s loan portfolios in the states of California, Washington, Oregon, and South Carolina.  Bayview does manage ‘credit sensitive’ loan portfolios and derivative funds that include packaged mortgage portfolios, so a parametric product is an immediate hedge in the case of an event that meets the USGS survey index associated with the bond.  Seems a suitable move for the management company as it does not have direct ownership of properties but does have exposure to indirect loss if there are mortgage defaults for its funds mix of loans.  Makes one think- loan originators would be doing the market a service if along with property insurance requirements for loans in the respective states there would be either an EQ insurance requirement, or even a parametric option for mortgagors in the event of a trigger occurrence.  Hedging ‘up the food chain’ is good for the portfolio manager but does not help address the potential cause of default.  Swiss Re also has the unique opportunity to market the parametric default risk products to primary mortgagees.  It’s a changing risk mitigation world.

Problem hiding in plain sight

First California, now Australia in the news due to property owners encountering challenges with property underinsurance and unexpected increases in property repair costs.  These concerns are not new and become front burner issues each time a significant regional disaster occurs, always attracting the attention of those who sit at the head of the political insurance table, the insurance commissioners.  California’s commissioner enacted a moratorium on policy cancellations in brushfire areas (1 million property owners involved), and Australia’s Treasurer Josh Frydenberg recently asked Aus property insurance carriers for detailed information to help the government and population better understand where insurance recovery efforts stand.   Not Dutch boys with fingers in the dike, but certainly ex post actions for circumstances that pre-existed the respective regions’ disasters.

At least in California the primary drivers of the problem are property owner valuation knowledge (or lack of it), ineffective underwriting valuation tools, policy premium and market share competition driving carrier lack of enthusiasm for change, and unpredictability of post-disaster rebuilding costs. Also- misconception on the part of the public- few policies (close to zero) include wording of restoring to pre-loss condition, or replacement with like kind and quality.  The reality of the underinsurance problem is that there is now a de facto rise in insureds’ ‘deductibles’ after a disaster due to inadequate coverage limits. The ‘deductible’ effect is mitigated by insureds employing personal property settlement proceeds in the dwelling rebuild costs, but all in all it’s a relative fools’ game.  The worst effect is the extreme hardening of the property insurance market to the point where dwelling insurance becomes unavailable and/or unaffordable. The easy fix is better upfront estimation of rebuild costs, but even with that there is then a problem for carriers- the marginal premium increase suggested under current methods in moving from a $500K limit to a $750K limit is far less than a comparable change from $250K to $500K, so is there an overarching lack of motivation to raise coverage limits?  An unexpected related potential effect for carriers- earlier triggering of reinsurance treaties due to the weight of maximum losses and lessening of rei appetites for renewals under existing agreements.   Without question structural changes (no pun intended) are needed in property policy valuations and underwriting for areas where the frequency of regional disasters is high.

*Contrarian viewpoints of an industry observer, not to be confused with that of mainstream press, and presented in the light of knowing that there are many forward-thinking players in the industry who will work to lessening the effects noted above.

#innovatefromthecustomerbackwards  #newinsurancebalance

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