Non-fungible tokens (NFTs) are a hot topic, gaining attention from pop culture to the business press. Most of this notoriety has been associated with the buying and selling of digital collectibles, but the underlying blockchain technology and this specific application of it have implications for tangible assets and for insuring both digital and physical properties.

For this reason, the Institutes RiskStream Collaborative – the risk-management and insurance industry’s first enterprise-level blockchain consortium – recently launched a free educational series about NFTs.

What are NFTs?

“Non-fungible” means an object is unique and can’t be replaced with something else. A dollar is fungible – you can trade it for another dollar bill or four quarters or specific numbers of other coins, and you still have exactly one dollar.  An individual bitcoin is fungible. A one-of-a-kind trading card isn’t fungible – if you trade it for a different card, you would have a different thing, and you would lose possession of your original card.

NFTs are unique digital markers that can be associated with an asset to identify it as one-of-a-kind.

Want to understand more? Watch the first episode.

Insurance potential

In the second episode, the RiskStream Collaborative brings in Jakub Krcmar, CEO of Veracity Protocol, to discuss the concepts of computer vision, digital twins, and NFTs of physical products. The ability to create a unique digital twin of exact replicas – like identical baseball cards or identical automobile gears – to create an NFT may have major insurance implications. One example was the potential for NFTs to be associated with high-value physical objects to demonstrate authenticity of ownership and reduce or eliminate fraud opportunities.

Episode three features Natalia Karayaneva, CEO of Propy, who explains the potential for NFTs in real estate transactions. She highlights some of the benefits of the NFT approach, underscoring the efficiencies brought to primarily paper-intensive processes. The potential for insurance also is discussed.

In episode four, Kaleido CEO Steve Cerveny wraps up the series by describing the tokens themselves. He highlights the ability to create NFTs to represent any asset. These tokens are programmable “things” on a blockchain, which can help with business processes. Blockchains are basically ledgers or databases. Like any ledger, they record transactions; unlike traditional ledgers, however, blockchains are distributed across networked computer systems. Anyone with an internet connection and access to the blockchain can view and transact on the chain.

This open, consensus-based nature of blockchain – with everyone on the chain checking the validity of every transaction according to an established set of rules – enables conflicts to be resolved automatically and transparently to all participants. This dispenses with the need for a central authority to enforce trust and allows participants to build in automation through smart contracts.

The Riskstream Collaborative is the largest blockchain consortium in insurance, with over 30 carriers, brokers, and reinsurers as members who lead governance and activity. An “associate member ecosystem” is beginning to be established, and RiskStream is inspecting use cases in personal lines, commercial lines, reinsurance, and life and annuities.



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