Ensuro, founded in 2021, is developing a decentralised underwriting solution for parametric insurance products. Unlike conventional insurers, the capacity it will provide uses funds governed by a smart contract on a blockchain.
Insurers are required to hold a minimum amount of capital, which is a high entry barrier to the market. The MGA (managing general agent) model, which allows companies to underwrite risks using third party capital, has helped many new insurtechs get started.
This capacity is generally provided by large insurers and reinsurers. Startups need to prove their concept to the big players to get this capacity, which can take up to a year, but without the capacity, it is hard to build the traction required to get it.
Ensuro aims to provide an easier way for startups to secure access to capacity. We spoke to founder and CEO Marco Mirabella to learn more about the business.
Marco has experience in venture capital and was until recently the Chief Strategy Officer of BigGo, a vertical search engine and price comparison website in Asia. He started Ensuro with the idea that investors could provide the capital required for parametric insurance startups with the help of blockchain technology.
Ensuro has designed a ‘liquidity pool’, a collection of cryptocurrency funds locked in a smart contract on a blockchain. When someone takes out a policy with one of Ensuro’s partners, a portion of the capital in the pool is automatically assigned to that policy. When a claim is triggered, the smart contract can pay out to the policyholder automatically.
The liquidity pool’s funds come from retail and professional investors depositing money in the form of ‘stablecoins’. Stablecoins are cryptocurrencies whose value is tied to an external reference, normally the US dollar. Other cryptocurrencies such as Bitcoin are prone to significant fluctuations in value.
Investors receive a share of the profits depending on how much they deposit and the length of their pre-defined cashback period (how long they are willing to wait for access when they withdraw). These incentives help Ensuro to plan ahead and operate at the correct solvency level for regulatory compliance.
Activity and partnerships
Ensuro was one of the winners of the Binance Hackathon, a blockchain web developer competition, in February this year, and has been accepted into the Celo Camp programme, an accelerator for blockchain projects.
Ensuro is applying for an underwriting licence from the Bermuda Monetary Authority under their innovation sandbox, which would allow the model to be tested with partners.
It is already talking to some of the companies we featured in our comprehensive report on parametric insurance last year about potential partnerships. The report is free to InsTech London members.
New parametric insurance solutions are becoming available across many areas, including natural hazards, cyber and health. You can keep up to date with new developments in the space by signing up for free to our dedicated parametric insurance newsletter.
Whilst the advent of blockchain technology did not transform the insurance industry as some had predicted, companies such as Ensuro are now demonstrating ways in which blockchain can facilitate new approaches. Blockchain and smart contracts are especially suited to parametric insurance because of the potential to automate the claims process. We’ll follow Marco and his team closely as this space develops.