Discussion paper on blockchain and smart contracts in insurance.
Date: 2021-06-09
Institutions: European Insurance and Occupational Pensions Authority
Subjects: EU market, blockchain, insurance contract, regulatory policy, smart technology, virtual currency

DISCUSSION PAPER ON BLOCKCHAIN AND 
SMART CONTRACTS IN INSURANCE

https://www.eiopa.europa.eu 

PDF 

ISBN 978-92-9473-295-8 

doi:10.2854/136043 

EI-01-21-124-EN-N

Luxembourg: Publications Office of the European Union, 2021

© EIOPA, 2021 

Reproduction is authorised provided the source is acknowledged.

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DISCUSSION PAPER ON 
BLOCKCHAIN AND SMART 
CONTRACTS IN INSURANCE

CONTENTS

TABLE OF FIGURES AND BOXES 

RESPONDING TO THIS DISCUSSION PAPER 

EXECUTIVE SUMMARY 

1. 

INTRODUCTION 

2. 

INTRODUCTION TO BLOCKCHAIN TECHNOLOGY 
AND SMART CONTRACTS 

3.  BLOCKCHAIN AND SMART CONTRACTS USE CASES 

IN THE EU INSURANCE MARKET 

4.  CRYPTO ASSETS USE CASES IN INSURANCE 

5.  BLOCKCHAIN AND SUPTECH 

6.  RISKS AND BENEFITS OF BLOCKCHAIN AND SMART CONTRACTS 

7.  REGULATORY BARRIERS IN RESPECT OF BLOCKCHAIN 

AND SMART CONTRACTS 

8.  EUROPEAN APPROACH TO BLOCKCHAIN AND SMART CONTRACTS 

IN INSURANCE 

ANNEX 1. CONSULTATION QUESTIONS 

ANNEX 2. ABBREVIATIONS 

ENDNOTES 

3

4

5

7

9

12

16

19

21

27

29

31

32

33

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EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYTABLE OF FIGURES AND BOXES

Figure 1. How blockchain works? 

Figure 2. Simplified smart contract coding example 

Box 1. Overview of decentralised P2P insurance and parametric insurance 
business model 

Box 2. Examples of blockchain and smart contract use cases in insurance 
reported by the NCAs 

Box 3. EU legislative proposal on markets in crypto assets (MiCA) 

Box 4. Initial Coin Offerings and tokenisation of assets 

Box 5. How stablecoins could impact the insurance sector 

Box 6. The FMA evaluation of blockchain use for supervision 

Box 7. Innovation facilitators focusing on blockchain 

10

11

12

14

16

17

18

19

28

3

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCERESPONDING TO THIS DISCUSSION PAPER

EIOPA welcomes comments on the ‘Discussion Paper on 
blockchain and smart contracts in insurance’.

Comments are most helpful if they:

 ›

 ›

 ›

respond to the question stated, where applicable;

contain a clear rationale; and

describe any alternatives EIOPA should consider.

Please send your comments to EIOPA by X XX 2021 re-
sponding to the questions in the survey provided at the 
following link:

https://ec.europa.eu/eusurvey/runner/EIOPA _Block-
chain_insurance_survey

Contributions  not  provided  using  the  survey  or  submit-
ted after the deadline will not be processed and therefore 
considered as they were not submitted.

PUBLICATION OF RESPONSES

DATA PROTECTION

Contributions received will be published on EIOPA’s pub-
lic website unless you request otherwise in the respective 
field in the EU Survey Tool.

Standard confidentiality statements in an email message 
will not be treated as a request for non-disclosure.

Please note that EIOPA is subject to Regulation (EC) No 
1049/2001  regarding  public  access  to  European  Parlia-
ment, Council and Commission documents and EIOPA’s 
rules on public access to documents.

Contributions  will  be  made  available  at  the  end  of  the 
public consultation period.

Please  note  that  your  personal  contact  details  (such  as 
names, email addresses and phone numbers) will not be 
published. They will only be used to request clarifications, 
if necessary, on the information you supplied.

EIOPA will process any personal data in accordance with 
Regulation  (EU)  2018/1725  on  the  protection  of  national 
persons  with  regard  to  the  processing  of  personal  data 
by Union institutions, bodies, offices and agencies and on 
the free movement of such data, and repealing Regulation 
(EC)  No  45/2001  and  Decision  No  1247/2002/EC.  More 
information on how EIOPA will treat your personal data 
can be found in the privacy statement.

4

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYEXECUTIVE SUMMARY

Blockchain and other distributed ledger technologies (DLTs), when properly used, have 
the potential to transform the functioning of a wide range of industries, including the 
insurance industry in Europe. Potential impacts are currently being explored across sec-
tors and by a variety of organisations. For example, the European Commission recently 
published a proposal for a regulation on markets in crypto-assets1 (MiCA), and a proposal 
for a regulation on a pilot regime for market infrastructures based on distributed ledger 
technology2 with the aim to provide a framework to allow for innovation in a way that 
preserves financial stability and protects consumers.

It is still early days for blockchain in European (re-)insurance sector. However, blockchain 
can be potentially used throughout the entire insurance value chain. It has the potential 
to  deliver  key  digital  opportunities,  reduce  duplication  of  processes,  increase  process 
automation, help cut costs, increase efficiency, enhance customer experiences, and im-
prove data quality, collection and analytics. It could also enable the development of new 
products and services, facilitating the uptake of insurance platforms and ecosystems, im-
proving the interaction with third parties, promoting completely decentralised peer-to-
peer (P2P) insurance business models or implementing parametric insurance products.

Blockchain could also provide opportunities for both prudential and conduct supervisors 
(SupTech) as well as facilitate RegTech solutions. The combination of smart contracts and 
blockchain could help to automate regulatory reporting and make it more efficient and 
transparent, improve consistency and data quality across firms, and allow regulators to 
get data on new areas of interest or to gain real-time access to signed contracts and the 
information they contain (real-time regulatory monitoring).

While  promising  to  drive  efficiency  in  business  practices  and  mitigate  certain  existing 
risks, the adoption of blockchain may also trigger new risks to insurance undertakings, 
supervisors, and consumers. As blockchain technology is still evolving, several challenges 
are  emerging,  such  as  the  complexity  of  the  technology,  data  protection  and  privacy, 
cyber risk, integration with legacy infrastructures, or interoperability and standardisation 
between different blockchains. Based on blockchain types and platforms chosen, perfor-
mance scalability challenges could arise as well. Concerns about the legal status of smart 
contracts also have been aired.

Although the current regulatory and supervisory framework can be considered mostly 
effective to address emerging risks, specific issues should be considered, based on the 
evolution of the technology and its uses in business processes. It is also important to 
ensure appropriate understanding by insurance undertakings and supervisors as well as 
proportionate governance policies and processes, to guarantee that all relevant risks are 
identified and properly managed.

Given  its  wide  range  of  applications  and  the  early  stage  of  adoption  in  the  insurance 
industry, most jurisdictions are still exploring policy and supervisory responses. This can 
cause legal uncertainty and act as barrier to the use of blockchain and smart contracts 

5

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEin insurance and could also lead to divergent regulatory and supervisory practices and 
different levels of consumer protection across the EU.

Hence a general European harmonised approach to blockchain could promote and facili-
tate the sound scaling of blockchain and smart contracts, including in the insurance con-
text. This is particularly relevant to promote coherence with overall consumer protection, 
financial stability and prudential regulation objectives, and to ultimately promote a more 
integrated and efficient European insurance market.

EIOPA would like to gather from interested parties their views on this Discussion Paper. 
Specific questions are asked at the end of each chapter.

EIOPA will assess the feedback to this Discussion Paper in order to better understand 
blockchain developments in the insurance sector as well as the risks and benefits related 
to them. This could also help to provide informed input for the upcoming legislative initi-
atives foreseen in the European Commission Digital Finance Strategy3. It could also sup-
plement EIOPA’s overall work on digitalisation, including in areas such as (re)insurance 
value chain and new business models arising from digitalisation, insurance platforms and 
ecosystems, open insurance, digital ethics and RegTech/SupTech.

6

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY1.  INTRODUCTION

1.1.  BACKGROUND AND 
RATIONALE

Blockchain4,  when  properly  used,  has  the  potential  to 
transform  the  functioning  of  a  wide  range  of  industries 
and can provide significant benefits to the European in-
dustry,  economy,  and  to  European  society  as  a  whole. 
Those potential changes in the economy and society are 
currently being explored across sectors and by a variety 
of organisations, including by the European Commission, 
which  is  exploring  the  role  of  blockchain  across  policy, 
funding,  legal  and  regulatory  fronts.5  More  concretely, 
recently published Digital Finance Strategy6 (DFS) states 
that by 2024, the EU should put in place a comprehensive 
framework enabling the uptake of distributed ledger tech-
nology  (DLT)  and  crypto-assets  in  the  financial  sector. 
Together  with  the  DFS,  the  Commission  also  published 
a proposal for a regulation on markets in crypto-assets7 
(MiCA) and a proposal for a regulation on a pilot regime 
for  market  infrastructures  based  on  distributed  ledger 
technology8, with the aim to provide a framework to allow 
for  innovation  in  a  way  that  preserves  financial  stability 
and protects consumers.

While it is still early days for blockchain in the European 
(re-)insurance sector, the number of potential use cases is 
constantly growing and can influence a number of insur-
ance functions, such as IT, operations, product design and 
development, pricing and underwriting, distribution and 
claims management.

Blockchain  is  being  applied  to  raise  efficiency,  reduce 
costs, develop new products, and lessen the need for in-
termediation and increase transparency.9 Blockchain and 
smart  contracts,  often  combined  with  other  emerging 
technologies such as Internet of Things (IoT) and Artificial 
Intelligence (AI), can be used for managing claims in a re-
sponsive  and  transparent  way,  for  Know-Your-Customer 
(KYC) assessment and accurate risk evaluation, lowering 
administration  and  underwriting  costs  and  supporting 
more accurate pricing. Automated claims submission and 

processing could improve claims assessment, fraud detec-
tion, and ensure more timely payments.10

However, while promising to drive efficiency in business 
practices and mitigate certain existing risks, the adoption 
of  blockchain  may  trigger  new  risks  to  insurance  under-
takings, supervisors and consumers. As blockchain tech-
nology is still evolving, several challenges are coming to 
attention,  such  as  performance  and  scalability,  energy 
consumption, data privacy and protection, cyber risk, in-
tegration  with  legacy  infrastructures,  or  interoperability 
between different blockchains. Based on blockchain types 
and platform chosen, performance scalability challenges 
could  arise  as  well.  Concerns  about  the  legal  status  of 
smart contracts could also arise.

As a response to EIOPA´s June 2020 consultation on (re)
insurance  value  chain  and  new  business  models  arising 
from digitalisation11, some stakeholders highlighted block-
chain and related business models such as the emergence 
of  decentralised  ‘self-insurance’  or  P2P  insurance  as  fur-
ther areas to look at from a supervisory perspective.

Although the current regulatory and supervisory frame-
work addresses risks in a comprehensive way, specific is-
sues  could  still  be  considered,  based  on  the  technology 
evolution and its use in business processes. It is important 
to ensure appropriate understanding by insurance under-
takings and supervisors as well as proportionate govern-
ance policies and processes, to guarantee that all relevant 
risks are identified and properly managed.12

EIOPA  has  conducted  a  survey  of  National  Competent 
Authorities (NCAs) on blockchain and smart contracts in 
insurance in Q2 2020.

The  aim  of  this  Discussion  Paper  is  to  provide 
a  high-level  overview  of  risks  and  benefits  of  block-
chain and smart contracts in insurance from supervi-
sory perspective, as well as to give an overview of the 
findings of the feedback received from NCAs through 
the aforementioned survey.

7

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEThis Paper also assesses some issues related to crypto as-
sets. EIOPA has monitored and will continue monitoring 
developments in the area of crypto-assets under a sepa-
rate work stream.

1.2.  LEGAL BASE

Article  1(6)  of  the  Regulation  establishing  the  EIOPA 
(Regulation (EU) No 1094/2010)13 requires the EIOPA to 
contribute  to  promoting  a  sound,  effective  and  consist-
ent  level  of  regulation  and  supervision,  ensuring  the  in-
tegrity,  transparency,  efficiency  and  orderly  functioning 
of financial markets, preventing regulatory arbitrage and 
promoting equal competition. In addition, Article 9(2) re-
quires  the  EIOPA  to  monitor  new  and  existing  financial 
activities.

8

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY2.  INTRODUCTION TO BLOCKCHAIN 
TECHNOLOGY AND SMART CONTRACTS

2.1.  BLOCKCHAIN AND DLT 
DEFINITION AND DIFFERENT 
TYPES OF BLOCKCHAIN

This chapter aims to summarise the key aspects raised in 
the  recent  literature  on  the  blockchain  features  and  its 
application in finance14, while not going into technical de-
tails, which are already sufficently covered in other fora.

Distributed ledger technology (DLT) enables parties with 
no particular trust in each other to exchange any type of 
digital  data  on  a  peer-to-peer  (P2P)  basis  with  fewer  or 
no  third  parties  or  intermediaries.15  In  this  way  it  takes 
at least in part the place of traditional intermediaries or 
trusted third parties. Data exchanged could correspond to 
any transactions or assets that can be translated into dig-
ital  form,  including  money  transfers  or  storage,  medical 
records, birth, marriage and insurance certificates, buying 
and selling goods and services, and insurance contracts.

Blockchain is a subset of DLTs, using ‘blocks’ of informa-
tion  to  keep  track  of  data  transactions  in  a  distributed 
network  of  multiple  nodes  or  computers.  A  transaction 
with  party  B  is  requested  by  party  A,  such  as  transfer-
ring money, setting up a contract, or sharing records. This 

transaction  is  broadcasted  to  a  distributed  network  of 
‘nodes’ or computers which will validate it according to an 
agreed set of rules called ‘consensus’ mechanism. When 
the transaction is validated, a new ‘block’ will be added to 
the blockchain.16 When a new block is added to the block-
chain, it is timestamped, a pointer to the previous block 
in the chain is provided, and the transaction data entered. 
After that it is processed by the cryptographic technique 
of hashing where a hash is calculated on the hash of the 
previous block plus the data contents of the new block. 
The result then becomes the hash of the new block.17

This process ensures that each block is linked to the pre-
vious one, thereby forming a chain of blocks (hence the 
name ‘blockchain’). The unique record that forms a block-
chain is shared by each node or computer in the network 
and  is  constantly  updated  and  synchronised.  As  a  data-
base  or  ledger,  blockchain  ultimately  stores  the  records 
of all transactions executed across the network. A block-
chain is essentially a continuously growing list of records 
and blockchain technology is thus well-suited for use-cas-
es  like  recording  events,  managing  records,  processing 
transactions, and tracing assets.18

This Discussion Paper will mainly use the term blockchain 
and will refer to DLT where necessary.

9

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEFigure 1. How blockchain works?

Transaction 

1

2

Transaction broadcasted 
to the network

3

Nodes / Peers validate 
the transaction

THE PROCESS 
OF BLOCKCHAIN

4

Validated transaction
added to a new block

5

New block added 
to the blockchain

6

New block distributed 
to all nodes

7

Transaction 
complete

Source: Blockchain Now And Tomorrow: Assessing Multidimensional Impacts of Distributed Ledger Technologies, Publications Office of the European Union, 
Figure 1: How a blockchain works
Luxembourg, 2019

There  are  a  large  variety  of  blockchains.  Based  on  their 
technical  and  functional  configuration  and  internal  gov-
ernance  structures,  blockchains  are  often  divided  into 
four  categories:  public  permissionless,  public  permis-
sioned, private permissioned and private permissionless.19

A blockchain is called ‘public’ or ‘open’ when anyone can 
read  and  access  the  whole  blockchain  and,  unless  they 
are  encrypted,  read  its  contents.  When  only  authorised 
entities have access, a blockchain is called ‘closed’ or ‘pri-
vate’. Blockchains can be further categorised as ‘permis-
sionless’  or  ‘permissioned’  depending  on  who  can  send 
and validate transactions. If anyone can send and validate 
transactions,  the  blockchain  is  called  permissionless.  If 
only authorised entities can execute or validate transac-
tions, the blockchain is called permissioned. There can be 
also hybrid blockchains combining different aspects men-
tioned above.

2.2.  SMART CONTRACTS AND 
ORACLES

From  an  insurance  perspective,  one  important  element 
for using blockchain in practice is smart contracts. Smart 
contracts are deterministic20 computer programs that are 
deployed and executed on a blockchain and that are ca-
pable of carrying out the terms of an agreement between 
parties  without  the  need  for  human  coordination  or  in-
tervention.21 These agreements can be recorded and vali-
dated into a blockchain which can then automatically exe-
cute and enforce the contract, usually under ‘if-then-else’ 
instructions: ‘if’ something happens (for example, if your 
flight is delayed) ‘then’ certain transactions or actions are 
carried out (the payment for flight delay insurance is au-
tomatically transferred).

10

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYFigure 2. Simplified smart contract coding example

Deﬁned event for payout: 

ﬂight is delayed

Source: EIOPA

if ﬂight is delayed 

< 2 hours:

payout = 0 €

else: 

payout = 100 €

The way in which transactions are verified and added to 
the  blockchain  guarantees  that  conflicts  or  inaccuracies 
are reconciled, and that in the end there is only one valid 
representation  for  each  transaction  (no  double  entries). 
Thus, it can be seen as an efficient way to automate some 
of  the  conditions  and  obligations  described  in  the  legal 
contract (e.g. insurance contract).22

In order to determine whether the conditions for the per-
formance of a smart contract have been met, secure data 
(input) from outside the ledger will often be required. This 
data is provided by so-called ‘oracles’. An oracle or data 
feed  provider  is  typically  a  third-party  service  designed 
for use in smart contracts on a distributed ledger. Oracles 
find  and  verify  real-world  occurrences  usually  through 
external database and submit this information to a block-
chain to be used by smart contracts (e.g. flight delay data-
base or weather database). The key is for the parties in the 

smart contract to agree on the identity of the oracle. The 
challenge  could  arise  when  oracles  are  (third-party)  ser-
vices and are not part of the blockchain. The parties need 
to  trust  these  sources  of  information  and  the  sources 
must be secure from hacking. Trusted and secure informa-
tion sources are crucial for the users of smart contracts. If 
the oracle alters the information taken from other sources 
or provides defective data, there may be no rewind or re-
set (immutability).23

Smart contracts are currently only feasible or applicable 
under limited and strictly circumscribed conditions – for 
instance,  when  there  is  no  need  for  physical  appraisals 
(e.g. for certain types of insurance claims24), no need for 
dispute resolution (although blockchain in itself could po-
tentially be used for setting up a dispute resolution plat-
form), or when there is a reliable oracle providing accurate 
information.

11

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCE 
3.  BLOCKCHAIN AND SMART CONTRACTS 
USE CASES IN THE EU INSURANCE MARKET

Blockchain  and  smart  contracts,  often  combined  with 
other emerging technologies such as IoT and AI, can be 
theoretically used throughout the entire insurance value 
chain.

From a client on-boarding perspective, by using a block-
chain-enabled  shared  database,  insurers  could  stream-
line  and  reduce  the  cost  of  their  KYC/AML  compliance. 
On-boarding of a customer needs to be done only once 
by  one  insurer/intermediary.  When  the  customer  wish-
es  to  engage  a  new  insurer/intermediary,  the  latter  can 
request access to documentation already on-chain in or-
der to confirm due diligence. Encryption ensures that an 
institution has access only to the documents to which it 
is  entitled,  even  as  any  change  in  the  customer’s  file  is 

transparent, both as to when the change was made and 
by whom. Transaction audits and surveillance can also be 
automated to a large extent.25

The use of blockchain in the underwriting process could 
result  in  improvements  in  efficiency  and  cost  reduction 
as a result of the inherent trust and transparency within 
blockchain, particularly when combined with automated 
processes collating and assimilating information (e.g. ex-
ternal data can be included to decrease risk and provide 
semi-automatic pricing).26

It  could  also  enable  the  development  of  new  products 
and services such as completely decentralised P2P insur-
ance or parametric insurance products.

BOX 1. OVERVIEW OF DECENTRALISED P2P INSURANCE AND PARAMETRIC INSURANCE 
BUSINESS MODEL

DECENTRALISED P2P INSURANCE

P2P insurance could be defined as a risk-sharing network where a group of individuals with mutual interests or sim-
ilar risk profiles pool their ‘premiums’ together to insure against a risk. Thus, P2P insurance enables individuals with 
similar interests to share the risk between themselves.27 Blockchain and smart contracts could increase both the 
scalability and decentralisation of P2P insurance/insurance-like products and services. With the blockchain design, 
each member of a pool can keep actionable records without the need for a trusted third party such as an insurer or 
platform provider. Additionally, smart contracts can be executed automatically once a certain criterion is fulfilled. In 
this way certain functions of a traditional insurer could be performed by a P2P network. These developments could 
potentially establish truly decentralised platforms/purely technical service providers/platform providers without 
an underlying insurance carrier. However, from a supervisory perspective it also raises the question of regulatory 
perimeter and applicable regulation (e.g. if these business models fall under the insurance distribution definition).28

PARAMETRIC INSURANCE

Parametric insurance is a type of insurance that does not indemnify the pure loss, but ex ante agrees to make 
a lump sum payment upon the occurrence of a triggering, objective and predefined event. A triggering event can 
be in relation to temperature (e.g. 30 days of drought in a given region), rainfall, wind speed, earthquake (e.g. up 
from certain magnitudes) or flight delay time (e.g. 45 minutes).

12

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYBlockchain  can  also  automate  large  part  of  claims-han-
dling, limiting the scope for disagreement between par-
ties  and  reduce  settlement  times  and  claims  handling 
cost. Claim events could be recorded in a blockchain. By 
enabling  better  coordination  between  insurers,  block-
chain can also be used to combat fraud. A blockchain-en-
abled shared database, with various levels of access and 
control, would enable insurers to eliminate processing of 
multiple claims from the same accident or establish own-
ership of high-value items through digital certificate and 
so reduce counterfeiting.29

Blockchain  could  streamline  information  exchange 
and payments between insurers and reinsurers. Using 
a blockchain-enabled shared database, insurers can enter 
primary data into smart contracts, with the  information 
being accessible to reinsurers, retrocessionaires and regu-
lators in real-time on a need-to-know basis. The data can 
be extracted from the blockchain for automated model-
ling, audits, and compliance checks. Risks can be ceded, 
and claims can be made with automated notification to all 
relevant parties.30

Blockchain  could  also  facilitate  accessing  and  sharing 
insurance-related  personal  and  non-personal  data 
(open insurance).31 Insurers already have access to their 

own policyholder data and claim records. By sharing this 
data within specific parameters on the blockchain, a poli-
cyholder no longer needs to obtain e.g. a no-claim certif-
icate and could more easily shop around. Similarly, claims 
data  is  usually  stored  in  independent  databases  within 
each  entity  (insurance  undertaking,  intermediary,  repair 
shop  in  case  of  motor  insurance),  sometimes  shared  by 
e-mail. By collaborating together, insurers, intermediaries 
and repair shops can form a consortium where the focus 
is on simplifying the process of exchanging claims data. 
While  some  of  the  solutions  with  similar  characteristic 
could  also  work  through  centralised  databases,  block-
chain could arguably facilitate this kind of data exchange.

Although  limited,  there  are  already  different  ‘live’  or 
proof-of-concept phase blockchain use cases throughout 
the EU insurance value chain. Practical use cases report-
ed include more efficient distribution processes, product 
design and development, claims management, back-office 
activities, re-insurance, dispute resolution as well as ‘end-
to-end’  solutions.  The  use  of  smart  contracts  in  the  EU 
seems also rather limited yet, mainly including parametric 
insurance and P2P insurance solutions, or participation in 
the international project such as Insurewave. Many of the 
reported use cases are still in testing phase.

13

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEBOX 2. EXAMPLES OF BLOCKCHAIN AND SMART CONTRACT USE CASES IN INSURANCE 
REPORTED BY THE NCAS

KYC/AML/digital identity solutions

In Italy, solutions to improve KYC and customer on-boarding are under testing.

PRODUCT DESIGN AND DEVELOPMENTS

In Italy the use cases include parametric policies for travel and holidays insurance or for coverage of damages 
to crops in the agrifood industry as well as the management of suretyship coverage. In the Netherlands the de-
velopments are related to pension funds (e.g. value transfer and personal information sharing between pension 
fund and the Ministry of the Interior Relations (the latter keeps all personal record of Dutch citizens (passport 
etc.). In Portugal, Aliança Portuguesa de Blockchain is supporting an initiative that consists in developing a new 
insurance product based on smart contracts for sport events.

POST-SALE SERVICES AND ASSISTANCE

In Italy, blockchain has been tested for dispute resolution, allowing customers, the undertaking and their lawyers 
to collect and store all the documentation, to bid the amount to settle the dispute (a ‘blind’ auction scheme 
allows the two parts to agree on the amount) and eventually to manage the smart contract closing the dispute 
and executing the payment.

CLAIMS MANAGEMENT

In Hungary, ski insurance automatically compensates for the damage due to the bad weather conditions or the 
technical fault of the lifts.32 The company allows users to customise the conditions of their travel insurance of the 
ski trips (e.g. the ideal percentage of functioning ski lifts during the trip), set the period of travel and expected 
compensation. The contract is going to be recorded as a smart contract in a public blockchain. In case the condi-
tions are met, consumer will receive the compensation automatically, without claiming process.

There are also some international projects. E.g. Insurwave33 was launched in 2018 with the idea to develop 
a working blockchain platform to connect all stakeholders in the insurance value chain with the same risk infor-
mation. The platform uses blockchain technology to support marine hull insurance. A new vessel is registered 
on chain and a premium is set by an algorithm with policy documents automatically distributed to carriers. The 
ship’s travel is recorded in real time, from location to weather conditions. When the ship moves through a risky 
area, this fact is recorded in its file and used for future underwriting. E.g. one large Danish shipping company has 
been part of this initiative.

REINSURANCE

The Blockchain Insurance Industry Initiative (B3i)34 was incorporated in 2018 and is 100% owned by 18 insur-
ance market participants around the world. Altogether, more than 40 companies are involved in B3i as share-
holders, customers, and community members. Since 2017, B3i has endeavoured to put together a smart contract 
for property catastrophe excess of loss reinsurance that rapidly reconciles accounts between an insurer and its 
reinsurers, without redundancy or latency. Following an event, pay-outs are automatically calculated to affected 
parties.

14

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYBOX 2 (CONTINUED)

‘END-TO-END’ SOLUTIONS

In Italy there are limited experiences of blockchain-based P2P platforms. Similarly in Lithuania one P2P 
insurance platform has intention to use blockchain technology. In Estonia, a company currently in test phase 
advertises itself as providing the capital to agents, brokers and Managing General Agents (MGAs) to launch their 
own insurance products fast. It is built on a blockchain, which will, according to the website, improve the current 
insurance business model by connecting the insurance entrepreneurs with capital making it easier for them to 
launch new products and save costs.

In Malta, one entity is proposing to integrate into its platform (as nodes) the insurance undertaking, insurance 
broker and the bank, giving the option also for the regulator to run a ‘regulatory node’ - providing access in re-
al-time to the regulator. The model is composed of an oracle that tracks and triggers the claims process once the 
death certificate is submitted. The process provides for integrated claims management system that enables rich 
data submissions (such as claims forms in pdf files) to be appended to the legacy systems of the stakeholders. It 
utilises blockchain encryption and private cloud storage combined with on-premises storage for transmitting the 
necessary information required for the process to occur.

OTHER

In Finland there has been a very small pilot, where blockchain was used for gathering data on cases where man-
datory motor liability insurance had not been paid. It was a small technical pilot. In Ireland, the use case include 
helping (re)insurance undertaking share data in a managed and transparent way across a wide range of products 
and at all levels of the value chain.

Portuguese Insurers Association is testing some options to use blockchain in insurance, particularly in claims 
settlement systems.
Source: EIOPA NCA survey on blockchain

QUESTIONS TO STAKEHOLDERS

1. In addition to those described in this paper, can you report other blockchain and smart contract use cases or 
business models in the EU or beyond, that might be worth to look at from supervisory/consumer protection per-
spective?

2. Please describe your own blockchain/smart contract use case/business model and challenges you have faced in 
implementing it, if any.

15

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCE4.  CRYPTO ASSETS USE CASES IN INSURANCE

In addition to the blockchain use cases described in the 
previous chapter, the use of crypto assets in the insurance 
sector  deserves  special  attention  given  that  their  use  is 
already relatively extended in financial markets compared 
to other blockchain use cases that are mostly at a proof-
of-concept stage. The European Commission’s draft leg-
islative proposal on markets in crypto assets (MiCA) de-
fines crypto assets as a digital representation of value or 
rights, which may be transferred and stored electronically, 
using  distributed  ledger  technology  or  similar  technolo-
gy. There are many different types of crypto assets. From 
a functional perspective, based on the work developed by 
ESMA35 and EBA36, crypto assets can be broadly classified 
into three categories:37

 ›

 ›

 ›

Payment-type:  often  referred  to  as  virtual  curren-
cies, crypto-currencies. They typically do not provide 
rights but can be used as a means of exchange (e.g. 
to enable the buying or selling of a good);

Investment-type: they typically provide rights (e.g. 
in the form of ownership rights and/or entitlements 
similar to shares, bonds or dividends);

Utility-type: a type of crypto-asset which is intend-
ed  to  provide  digital  access  to  a  good  or  service, 
available on DLT, and is only accepted by the issuer 
of  that  token.  For  example,  in  the  context  of  cloud 
services, a token may be issued to facilitate access.

BOX 3. EU LEGISLATIVE PROPOSAL ON MARKETS IN CRYPTO ASSETS (MICA)

On 24 September 2020 the Commission published a legislative proposal for a regulation on markets in crypto 
assets (MiCA)38. The new rules seek to clarify the application of existing EU rules to crypto-assets, and will allow 
operators authorised in one Member State to provide their services across the EU (‘passporting’). To this extent, 
the legislative proposal introduces a number of safeguards including capital requirements, custody of assets, 
complaint handling processes, and common disclosure standards for the issuance of Initial Coin Offerings (ICOs). 
Issuers of significant asset-backed crypto-assets (so-called global ‘stablecoins’) would be subject to specific 
requirements.

Insurance undertakings have been explicitly excluded from the scope of MiCA (Article 2(3)), but this is not the 
case for insurance intermediaries and pension schemes. Therefore, the latter would need to comply with MiCA 
in case they would raise capital via Initial Coin Offerings (ICOs) or issue their own crypto-assets for paying 
insurance premiums/pay out claims. This would also be the case when insurance intermediaries sell with advice 
unit-linked life insurance products with crypto asset funds as underlying investments.

Moreover, some innovative types of parametric insurance business models using smart contracts based on 
DLT or similar technology (e.g. crop insurance or flight delay insurance) could also potentially be considered as 
utility tokens, as well as other utility tokens (other than intra-group transactions) potentially offered by pension 
schemes or insurance intermediaries (e.g. gym voucher tokens). Moreover, decentralised insurance-like business 
models operating with DLT or similar technology such as some innovative types of peer-to-peer (P2P) insurance 
or those offering ‘protection’ to consumers by betting on the occurrence of a particular event (e.g. flight cancella-
tion) could also potentially fall under the scope of MiCA.

16

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYOne possible use of crypto assets in insurance is the in-
vestment in crypto assets, either directly by purchasing 
crypto assets as an investment, or indirectly by investing 
in financial instruments with crypto assets as underlying 
assets.  Based  on  EIOPA’s  analysis  of  Solvency  II  data, 

a  very  limited  number  of  European  insurance  undertak-
ings  already  count  with  such  types  of  investments,  fun-
damentally via unit-linked life insurance products where 
the risks (and benefits) are borne completely or partially 
by the consumer.39 40

BOX 4. INITIAL COIN OFFERINGS AND TOKENISATION OF ASSETS

Other than the investments in crypto assets, insurance undertaking and intermediaries could also raise capital 
via Initial Coin Offerings (ICO’s) across multiple jurisdictions in a relatively seamless and digital manner. No 
ICOs launched by insurance undertakings and intermediaries were reported by NCAs in 2020, as opposed to 3 
ICOs reported in 2018.

In addition to ICOs, new types of tokenisation of assets (i.e. utility tokens and investment tokens) are emerging 
and could impact the insurance sector in different ways. This is for instance the case of crowdfunding initiatives 
where the money invested in a fund (and the inherent rights) is tokenised amongst the different investors. Similar 
developments could potentially take place, for instance, in the area of P2P insurance business models. Other re-
ported examples of tokenisation of assets include in the area of real estate transactions recording the mortgage 
trajectory on a blockchain (not necessarily tokenised), or in the area of digital identities (tokenisation of identi-
ties) and intra-group transactions.

Moreover, only one NCA reported the case of an insur-
ance undertaking in its jurisdiction allowing customers to 
pay insurance premiums or receive loss refunds with 
crypto assets. In several jurisdictions this is not possible 

since  there  are  national  legal  requirements  establishing 
that  such  payments  need  to  be  done  in  a  legal  tender. 
On  the  other  hand,  in  other  jurisdictions  this  would  be 
possible given that there is no specific provision against it.

17

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEBOX 5. HOW STABLECOINS COULD IMPACT THE INSURANCE SECTOR

Stablecoins have been touted as one of the possible remedies to address the high volatility of some crypto as-
sets. Stablecoins are crypto assets with the value pegged to another asset, typically fiat currencies, commodities, 
or to even another type of crypto asset. A stablecoin arrangement typically involves 3 key interconnected func-
tions: (i) payments, whereby stablecoins are used as a transfer of value to make payments; (ii) asset management, 
whereby the proceeds are invested in low-volatility assets; and (iii) a user interface to link the users to with third 
parties offering additional functionalities (e.g. wallet providers).41

While stablecoins have existed for some time, during 2019 they attracted a lot of attention in the media following 
the announcement by Facebook of its intention to launch its own stablecoin through the Diem Association 
(formerly the Libra Association). Given Facebook’s large and international customer base, its stablecoin could 
potentially trigger a global widespread adoption of stablecoins, which has led to international standard setting 
bodies to refer to this phenomenon as ‘global stablecoins’.42

Specifically in insurance, stablecoins could potentially be used as means to pay insurance premiums and/or loss 
refunds in those jurisdictions where there is not a legal requirement to make such payments in legal tender. This 
could be done either by purchasing standalone insurance products (e.g. mobile phone insurance purchased via 
WhatsApp), or as an ancillary to other products or services like airplane tickets or holidays bookings (e.g. travel 
insurance cross-sold with an airplane ticket purchased online with Facebook’s stablecoin).

In  addition  to  bespoke  insurance  cover  provided  to  cor-
porate exchanges or wallet storage providers through the 
Lloyds  Market,43  two  other  jurisdictions  have  reported 
cases of insurance products covering the loss or theft 
of crypto assets. In one case, this was linked to a ransom-
ware  insurance  product,  and  in  another  case  there  was 
an insurance undertaking considering the launch of a cy-

ber-insurance  product  specifically  covering  the  ‘theft  of 
electronic currency’. However, most NCAs consider that 
in their jurisdiction cyber insurance products typically ex-
clude such coverage. Silent or non-affirmative cover could 
also potentially exist, i.e. instances  where loss of crypto 
assets is not explicitly excluded in the terms and condi-
tions of another insurance policy.

QUESTIONS TO STAKEHOLDERS

3. Are you aware of practical examples of crypto-assets use cases in insurance? Please describe these use cases, 
specifying the types of crypto assets concerned (e.g. payment-type, investment-type, or utility-type) and explain 
whether they are already being implemented or they are still at a proof-of-concept / early stage of development.

4. Without prejudice of your reply to the previous question, are you aware of insurance products covering the loss 
or theft of crypto assets being marketed to retail or commercial clients? Please explain your response.

5. How do you think that the investments in crypto assets by insurance undertakings will evolve during the next 
3 years?

6. How do you think the European Commission’s draft legislative proposal on markets in crypto assets (MiCA) will 
impact the use of crypto assets in the insurance sector?

18

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY5.  BLOCKCHAIN AND SUPTECH

Around  the  world,  supervisory  authorities  are  assess-
ing how to increasingly use new technologies, including 
blockchain, to support their supervisory review process, 
making  it  more  flexible  and  responsive.  EIOPA  SupTech 
Strategy44 already refers to blockchain as as a technology 
to be further explored.

Blockchain could in theory provide opportunities for both 
prudential and conduct supervisors, as well as facilitating 
RegTech solutions. E.g. in regulatory reporting, the com-
bination of smart contracts and blockchain could help to 
automate regulatory reporting and make it more efficient 
and  transparent,  improve  consistency  and  data  quality 
across undertakings, and allow regulators to get data on 
new areas of interest with real-time access to signed con-
tracts and information they contain (real-time regulatory 
monitoring),  reducing  compliance  costs  and  making  the 
whole insurance sector more transparent.45

For the time being, while data-driven supervision is high 
on the agenda of most NCAs, few NCAs are currently us-
ing blockchain as a substantial component to support the 
supervision.  However,  some  NCAs  are  investigating  the 
inclusion of this technology.

Management of registers and lists of undertakings/inter-
mediaries together with supervisory reporting and publi-
cation of data and statistics are the main areas of super-
vision where NCAs potentially see the biggest impact in 
the future. E.g. Central Bank of Hungary (MNB) is plan-
ning  to  develop  a  register,  based  on  DLT  that  may  con-
tain data on property insurance for real estates used as 
collateral for mortgage loans. Similarly, EIOPA, its Mem-
bers and Observers are assessing the possibility to build 
a register of insurance undertakings where blockchain will 
be one of the options to be considered, where each NCA 
would host a node of the register, thus guaranteeing full 
consistency of the information shown in all national and 
European registers in the EEA.

The most important factor currently restraining the use 
of  blockchain  for  supervision  seems  to  be  the  fact  that 
the efficiency of using blockchain for supervision has still 
to be evidenced. Further work is probably needed to ad-
dress these concerns and small-scale projects or a study 
to  analyse  potential  alternative  business  cases  of  block-
chain could help in exploring the best way to harness the 
potential of blockchain technologies.

BOX 6. THE FMA EVALUATION OF BLOCKCHAIN USE FOR SUPERVISION

The Austrian Financial Market Authority (FMA) has actively promoted awareness of the potential uses, 
strengths and weaknesses of the blockchain technology across its departments. Multiple talks and train-
ings including external experts and researchers were organised. However, as of now no clear use case where 
a blockchain solution would be an efficient and effective tool to utilise has emerged. A more general reason is, 
that strong points of this technology make it especially suited to transparent/peer-to-peer based environments, 
whereas FMA´s position is that of a central supervisor handling highly confidential data, which undercuts the 
advantages of blockchain in many potential scenarios.

Source: EIOPA NCA survey on blockchain

19

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEQUESTIONS TO STAKEHOLDERS

7. Do you see other blockchain/smart contract use cases in RegTech/SupTech that might be worth to look at further 
from supervisory/consumer protection perspective?

8. Please describe your own blockchain/smart contract use case/business model in RegTech/SupTech and the chal-
lenges you have faced in implementing it, if any.

20

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY6.  RISKS AND BENEFITS OF BLOCKCHAIN AND 
SMART CONTRACTS

While promising to drive efficiency in business practices 
and mitigate certain existing risks, the adoption of block-
chain may trigger new risks to insurance undertakings, su-
pervisors and consumers. As blockchain technology is still 
evolving, general concerns are showing up, such as uncer-
tainties caused by absence of regulatory clarity, complexi-
ty of the technology, data privacy, integration with legacy 
infrastructures,  or  interoperability  and  standardisation 
between different blockchains. Based on blockchain types 
and platforms chosen, performance and scalability chal-
lenges  could  arise.  Some  risks  are  related  broadly  to  its 
emerging technology status. Additionally, the decentral-
ised nature of the blockchain might create risks that are 
different from traditional centralised solutions.

Given the very early stage of blockchain and smart con-
tract development/implementation as well as lack of ex-
perience related to that, potential risks of blockchain and 
smart contracts (and consequently, necessary safeguards) 
but also benefits are difficult to foresee comprehensively. 
The probability and impact of those risks also depend on 
the specific use case and nature of the blockchain solu-
tion.46 Possible regulatory course taken and further evolu-
tion of the market in future can also effect risks and ben-
efits. Hence, any detailed classification of both risks and 
benefits can be seen as indicative only, although general 
potential  risks  that  deserve  scrutiny  and  adequate  safe-
guards can be highlighted.

BLOCKCHAIN AND SMART 
CONTRACTS-RELATED RISKS FOR 
CONSUMERS

From  a  consumer  protection  and  transparency  per-
spective,  the  provision  of  advice  and  related  disclosure 
regulations may need further analysis to address any con-
fusing aspects of blockchain and smart contracts.47 While 
smart  contracts  currently  in  place  seem  to  be  relatively 
simple and leading to further standardization and simplifi-
cation, more complex products in the form of automatical-
ly executing smart contracts, could be expected to require 

especially close attention regarding customer information, 
disclosures and sales process. The complexity associated 
with the blockchain and smart contracts may produce mis-
understandings about the products and respective risks, 
especially for consumers insuring material risks or signing 
up for long term products without an exit option.

The  automated  execution  and  enforcement  of  con-
tractual conditions previously set by the relevant parties 
might also lead to inability to manage any contingencies 
arising during the execution of the smart contract.48 This 
may also affect the submission of effective complaints by 
consumers.  Risk  of  exclusion  for  customers  that  prefer 
more traditional methods of communication or that have 
a  low  level  of  technological  education  or  skill  could  also 
occur.

Some new blockchain-based products might also lead to 
regulatory perimeter risk, or might experience legal un-
certainty or different treatment in different jurisdictions 
(e.g. certain decentralised P2P insurance platforms), ulti-
mately decreasing consumer protection. The legal validity 
of smart contracts vis-a-vis the applicable civil law princi-
ples could also raise issues.

Blockchain solutions could also increase fraud and mon-
ey laundering risk. Information stored on the blockchain 
itself  will  usually  be  visible  and  transparent  to  the  par-
ticipants of the system. However, data protection needs 
could require the anonymisation of data and thus limit the 
identification of real identities.

From a legal and data privacy perspective there is a risk 
that  the  combination  of  large  amounts  of  historic  data 
about a consumer or a group of customers may result in 
an  indirect  use  of  sensitive  data  otherwise  not  allowed 
by laws. Given that records on the blockchain are large-
ly  tamper-resistant  and  immutable,  the  adverse  impact 
on  compliance  with  certain  GDPR  provisions,  such  as 
the right to be forgotten and data erasure requirements, 
needs to be also carefully considered.

From  an  ICT/cyber  risk  perspective,  the  security  and 
reliability  of  the  underlying  technology  as  well  as  smart 

21

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEcontract  programming  mistakes  are  important.  Smart 
contracts could be also subject to hacking. Possible cyber 
risks related to key management are also relevant.

There  is  also  a  significant  financial  education/expec-
tations  gap  which  needs  to  be  addressed.  Consumers 
may  not  be  aware  of  all  blockchain  and  smart  contract 
features,  including  the  importance  of  proper  manage-
ment of public-private keys, as necessary. Complexity and 
novelty can create a gap in consumer’s know-how about 
the products they buy, and can also increase difficulty in 
court  decisions  when  litigation  arrives.  In  any  case,  po-
tential consumers need to fully understand the contract 
they are entering, its features (e.g. when contract enters 
into  force,  coverage  and  conditions)  and  consequences, 
and the provision of advice and information has to meet 
the standards expected in traditional policies.

Specifically concerning crypto assets, the risk for consum-
ers are outlined in the warning to consumers issued by the 
European Supervisory Authorities in February 2018.49 The 
warning  mentioned  risks  such  as  the  unregulated  nature 
of several types of crypto assets, their high volatility and 
‘bubble risk’,  the  lack  of  price  transparency  or  risks  that 
consumers could be provided with inaccurate or misleading 
information. In this regard, it should be noted that some of 
those risks are not applicable to all types of crypto assets 
(e.g. stablecoins are not highly volatile). The latest review 
of the Anti-Money Laundering Directive (AMLD5) has ad-
dressed  some  risks  linked  to  anti-money  laundering,  and 
some jurisdictions have passed their own bespoke crypto 
assets legislation at national level. Once entered into force, 
the MiCA legislative proposal is also expected to mitigate 
several of these risks for consumers. However, for the time 
being most NCAs consider that the European Superviso-
ry Authorities (ESAs) warning to consumers remains valid 
and that crypto assets are still not appropriate for unexpe-
rienced and/or unsophisticated retail consumers.

BLOCKCHAIN AND SMART 
CONTRACTS-RELATED RISKS FOR 
UNDERTAKINGS

Potential  risks  include  lack  of  knowledge  on  block-
chain  as  well  as  governance  challenges,  especially  due 
to  potentially  high  dependency  on  external  platforms 
and IT suppliers. Setting up a blockchain solutions would 
also require the availability of technical personnel with 
a specific skillset (or accept a high risk of dependency on 

third  parties).  There  might  be  also  interoperability  risk 
between different blockchains and lack of integration with 
internal legacy systems or issues related to the migration 
of legacy data into the new systems. There might be also 
a need to enhance ICT/cyber resilience and set up ade-
quate  recovery  plans  to  address  and  manage  potential 
risks. Similarly risks are related to maintain efficient inter-
nal controls, risk management and compliance functions. 
Performance and scale-up risk might also occur, e.g. the 
business risk of not arriving at profitable blockchain opera-
tions while having invested heavily in this technique.

Although still limited, the decentralised element of block-
chain might also lead to reduced reliance on traditional in-
surance intermediaries, ultimately leading to new market 
structures (e.g. decentralised P2P insurance).

More concretely for smart contracts, the issues related 
to oracles, including dependency on, and reliability of or-
acles are also a major concern. The smart contract itself 
depends on input data for its execution, including often 
external data. These external oracles could introduce de-
pendencies and may, in some cases, lead to heavily cen-
tralised contract execution.50 This could also include the 
question who determines which oracles are necessary in 
smart  contracts,  how  to  guarantee  their  reliability  (e.g. 
should they possibly be validated before use in order to 
secure the reliability) and who is ultimately accountable 
in  case  the  information  is  not  accurate.  Related  to  that, 
change and governance of smart contracts could also 
be seen as an issue, including governance of the chain and 
ownership of data.

Concentration  risk  and  vendor/service  provider  risk 
(lock-in  risk)  could  also  occur,  e.g.  when  using  external 
data  vendors,  oracles  or  other  third  parties.  From  anti-
trust perspective, there is a possibility of the creation of 
new barriers to entry in some market segments/lines of 
business due to the necessary investment in technology 
to achieve a viable business case. The latter might not be 
achievable  for  smaller  insurance  undertakings  (although 
less  complex  blockchain  solutions  seem  to  be  more  ac-
cessible also for SMEs). This can again increase the con-
centration risk.

Insurers need also consider the manner in which the use 
of  blockchain  and  smart  contracts  may  adversely  af-
fect  consumers  and  mitigate  risks  related  to  customer 
information  and  provision  of  advice,  e.g.  entities  need 
to  ensure  that  the  necessary  disclosures  are  made  and 
the  demands  and  needs/suitability  and  appropriateness 
assessments  are  effectively  carried  out  notwithstanding 
the use of blockchain technology (see above on consum-

22

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYer risks). Otherwise, regulatory as well as reputational 
risks might occur.

Finally,  legal  uncertainty  can  occur.  While  blockchain 
could  support  (depending  on  the  solutions,  e.g.  public 
and  permissionless  vs  private  and  permissioned  block-
chain)  KYC/AML  compliance51,  the  anonymity  inherent 
to a blockchain-type technology can also represent a risk 
concerning the compliance with AML regulatory require-
ments, and, the new type of products that can arise from 
this  technology  (e.g.  products  structured  on  crypto-as-
sets; products using virtual currencies). Similarly it might 
be difficult to comply with some of the provisions of the 
GDPR (e.g. right to be forgotten). Additionally, the legal 
status  of  ‘smart  contract’  can  raise  questions  e.g.  how 
does it interact with general contract law principles.52

As far as the risks arising from crypto assets are concerned, 
to date their impact is very limited due the low materiality 
of insurance undertaking’s investments in crypto assets. 
Should  these  investments  increase  in  the  future,  insur-
ance undertakings would be exposed to a number of risks 
including  market risks  (namely  due  to  high  volatility  of 
some crypto assets), credit and counterparty risks (e.g. 
a default from a crypto-assets exchange or wallet provid-
er) or operational risks (including cyber risks). Moreover, 
as noted by several international standard setting bodies 
the so-called global stablecoins have not received a wide-
spread  adoption  yet  so  their  potential  financial  stability 
implications  are  also  limited,  although  developments  in 
this area could unfold very quickly. However, the ongoing 
trends in stablecoins and Central Bank Digital Currencies 
(CBDCs) could eventually influence how undertakings ap-
proach the use of crypto assets.

Insurance undertakings could also face compliance risks, 
namely with the prudent person principle included under 
Article 132 Solvency II, since it can be challenging for in-
surance undertakings to properly identify, measure, man-
age and control the risks of several types of crypto assets. 
From a conduct of business perspective, insurance under-
takings  will  also  need  to  comply  with  the  requirements 
included in the Insurance Distribution Directive (IDD). In 
the particular case of unit-linked life insurance products 
with  crypto  assets  as  underlying  assets,  they  will  most 
likely need to manufacture and distribute these products 
to  a  tightly  defined  target  market  of  sophisticated  con-
sumers, who understand the risks involved around crypto 
assets. Special attention should also be given to the de-
velopment of reliable performance scenarios and risks in-
dicators required in the Key Information Document (KID) 
under the Package retail investment and insurance-based 
products (PRIIPs) Regulation.

BLOCKCHAIN AND SMART 
CONTRACTS-RELATED RISKS FOR 
SUPERVISORS

Most of the risks mentioned above in regard to consumers 
and  undertakings  are  relevant  also  for  NCAs  when  they 
use  blockchain  themselves  for  e.g.  SupTech  solutions,  as 
well as when conducting supervision (e.g. ICT/cyber risk, 
fraud  risks,  data  privacy,  interoperability  risk  etc.)  as 
the mission of the NCAs is to ensure a sound regulatory 
and supervisory framework for the insurance market.

From the perspective of the use of blockchain for super-
vision, it is important that NCAs obtain a proper under-
standing  of  the  potential  risks  associated  with  deploy-
ments  of  this  technology,  and,  to  the  extent  necessary, 
monitoring  that  undertakings  and  intermediaries  appro-
priately manage and mitigate relevant risks, understand-
ing and overseeing market developments, assessing gov-
ernance arrangements (especially in permissioned chains) 
and  checking  the  substantial  application  of  the  regula-
tory perimeter. Indeed, the biggest challenge for NCAs 
seems to keep track on market developments and to un-
derstand the blockchain technology, and assess the risks 
and benefits of its usage in the insurance market.

It can be also predicted that NCAs will inevitably oversee 
increased  co-operation  between  insurance  companies/
intermediaries  and  relevant  third  parties/start-ups53  in  or-
der to plan or establish part/most of their operations based 
on  blockchain  technology.  Indeed,  despite  the  decentral-
ised  nature  of  blockchain,  undertakings  will  inevitably  be 
placing reliance on certain third parties (such as blockchain 
developers and nodes themselves). This will inevitably have 
an  impact  on  the  governance  of  undertakings  and  bring 
changes to their legacy systems and responsibilities. Hence, 
NCAs need to ensure that in this respect, companies build 
the necessary resilience in their governance to ensure ap-
propriate intervention to adapt accordingly. Concentration 
risk  is  also  important  from  supervisory  perspective,  e.g. 
the use of few networks or oracles by the insurance sector. 
Moreover,  industry  specific  blockchain  platforms  such  as 
Hyperledger, Corda are gaining momentum.

Finally, although blockchain and smart contract use cases 
in insurance are still limited, the decentralised element of 
blockchain might also lead to reduced reliance on tradi-
tional insurance intermediaries, ultimately leading to new 
market  structures.  Impact  of  this  on  consumers  is  also 
important  to  consider,  including  from  possible  financial 
exclusions perspective.

23

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEFrom a broader supervisory perspective the question aris-
es  as  to  who  oversees  the  correct  and  legitimate  func-
tioning of the complex structures of blockchain and smart 
contracts and how. This could also include more systemic 
risks, e.g. as there is no central authority to correct the 
contract in case there are some wrong transactions, being 
activated automatically, a lot of contracts can be settled 
in a short time, leading to sudden market moves.

Particularly concerning crypto assets, the European Com-
mission’s  draft  legislative  proposal  will  address  certain 
gaps in the existing legislation. Specifically from an insur-
ance perspective, given the current stage of development 
of crypto asset markets and their materiality for the insur-
ance sector the supervisory review process rules seems 
sufficient.  It  is  important  that  insurance  undertakings 
inform  the  supervisory  authority  of  actual  and  planned 
crypto-asset exposure in a timely manner and provide as-
surance that it has fully assessed the permissibility of the 
activity and the risks associated with the intended expo-
sures and services, and how it has mitigated these risks. 
If crypto-asset investments become significant, closer su-
pervisory attention may be required. Supervisors should 
also  closely  monitor  the  potential  financial  stability 
implications  arising  from  global  stablecoins.  Moreo-
ver given rapidly evolving technical capacities, a focus on 
building  expertise  and  maintaining  this  remains  impor-
tant for supervisors.

BLOCKCHAIN AND SMART 
CONTRACTS-RELATED BENEFITS 
FOR CONSUMERS

Blockchain  could  enhance  consumer  experiences 
through higher efficiency/automation and new products 
and services better tailored to consumer needs (e.g. P2P 
insurance  or  on-demand  insurance  or  parametric  prod-
ucts), easier and faster access to insurance cover or better 
and faster claims and settlement processes. It could also 
facilitate  better  integration  with  payment  infrastructure 
(e.g. for premiums payments).

the blockchain). This can result in more dynamic pricing 
and,  again,  in  more  flexible  and  personalised  products 
and  services.  It  could  also  facilitate  advice  services.  E.g. 
insurers  could  choose  to  convert  multiple  policies  into 
smart contracts, enabling them to produce a single, con-
solidated view of policy data and documentation in near 
real-time. All this could potentially lower administrative 
costs, which would be an obvious benefit for the policy-
holders, but also improve competition, ultimately again 
of the direct interest to customers.

Blockchain  could  also  increase  transparency,  e.g.  in 
theory, the openly visible nature, where implemented in 
public,  ‘if-then’-based  architecture  and  potentially  auto-
matic  execution  of  smart  contracts  can  enhance  under-
standing of the pay-out conditions of insurance policy or 
can gain an insight into the actual settlements between 
their peers and an insurance undertaking. This could be 
an incentive for insurers to apply more generous condi-
tions for pay-out than would be the case if the claim was 
only settled between customers and undertakings in pri-
vate.  Increased  transparency  could  also  facilitate  fraud 
detection.

Potential benefits for consumers arising from crypto assets 
could  include  more efficient and cheaper transactions 
when  purchasing  insurance  products,  namely  as  a  result 
of fewer intermediaries being involved. Crypto-assets also 
offer  a  wider  range  of  investment  opportunities  for 
consumers with different risk profiles. Crypto assets could 
also foster financial inclusion amongst those populations 
that do not have easy access to traditional financial servic-
es such as bank accounts or credit cards, and thus enhanc-
ing their access to insurance products (e.g. they would not 
need a bank account to purchase insurance products and 
make  renewal  payments,  since  this  could  potentially  be 
done through their social media account).55

BLOCKCHAIN AND SMART 
CONTRACT-RELATED BENEFITS 
FOR UNDERTAKINGS

Opportunities for voluntary data sharing by customers 
(under the GDPR provisions) could also facilitate open in-
surance/open  finance  developments54,  providing  oppor-
tunities  for  new  products  and  services,  so  that  insurers 
can e.g. better assess consumer behaviour and risk pro-
files on an ongoing/real-time basis (e.g. compiled through 
the use of connected devices and exchanged directly on 

Blockchain  could  be  used  to  support  existing  business 
models as well as to gain a competitive advantage by al-
lowing the introduction of new products and services, 
better  tailored  to  consumer  needs.  By  combining  data 
from  contracts,  claims  and  consumer  documentation  in 
general, blockchain could enhance wider and more rapid 
development  of  personalised  insurance  and  services 

24

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYand innovative product design (e.g. P2P insurance; par-
ametric insurance; and IoT-based products).

Blockchain-based systems might allow for high degrees 
of  automation  in  some  processes  (e.g.  underwriting, 
price optimisation). E.g. it could allow to automate some 
of  the  conditions  and  obligations  within  insurance  con-
tracts as well as facilitate standardisation of contracts and 
facilitate integration with public databases or information 
exchange with third parties (if accessible via API and web 
services). It could also help to conduct automated audits. 
By  deploying  relevant  rules  within  smart  contracts,  in-
surance entities can have improved and more efficient 
underwriting  (e.g.  setting  rates,  by  relying  on  big  data 
analytics and access to demographic data, GPS data used 
to collect premiums based on kilometres driven), pricing 
and claims management processes. For instance, smart 
contracts  would  automatically  activate  and  determine 
pay out to or from policyholders as a response to the trig-
gering of pre-determined events or information.

Benefits  could  also  include  e.g.  better  integration  with 
payment services. Better data integrity and accuracy and 
the use of smart contracts also enables real-time settle-
ment  of  claims  or  automation  of  a  large  part  of  claims 
handling, leading to more efficient claims management. 
Blockchain could also reduce duplication of processes and 
data duplication thereby improving quality of data. This all 
can lead to increased efficiency and lower operational 
costs.

Blockchain could also provide enhanced security, offer-
ing a single source of truth. This enables better coordina-
tion between insurance entities, since it facilitates the 
establishment  of  a  transparent  permissioned  network/
database to optimise secure sharing of relevant data re-
cords essential to all parties, possibly with different lev-
els  of  access  to  information.  It  could  also  open  up  new 
cross-selling  options  that  might  help  in  opening  new 
consumer  segments.  This  all  can  be  seen  again  as  indi-
rectly improving the overall customer experience.

Similar  to  consumers,  insurance  undertakings  could  also 
benefit  from  more  efficient  and  cheaper  transactions 
(including  cross-border  transactions)  when  using  crypto 
assets  to  sell  insurance  products  and/or  to  pay  loss  re-
funds. Crypto-assets also offer a wider range of business 
models (e.g. P2P insurance) or investment opportuni-
ties  to  insurance  undertakings.  Insurance  undertakings 
and  more  particularly  InsurTech  start-ups  could  also  use 
crypto  assets  as  an  alternative  funding  tool  and  benefit 
from  the  possibility  to  raise  capital  on  a  cross-border 
and  frictionless  basis  with  the  launch  of  ICOs.  The  to-
kenisation of tangible assets (e.g. in the area of real estate 
properties) and intangible assets (e.g. data, software, intel-
lectual property rights) also have the potential to increase 
the liquidity, transparency and tradability of such assets.

BLOCKCHAIN-RELATED BENEFITS 
FOR SUPERVISORS

RegTech and SupTech solutions can help NCAs and in-
surers to cope with administrative burden and keep the 
quality of supervision up-to-date with increasing regula-
tory requirements and amount of data to analyse.

Data as well as the fostering of SupTech solutions provide 
NCAs  with  improved  data  quality  and  a  wider  source 
of  reliable  data.  Blockchain  also  enables  immutable  re-
cord-keeping  and  transaction  processing  through  P2P 
exchange of digital data which is constantly updated and 
synchronised.  The  inherent  trust  and  transparency  could 
facilitate  the  establishment  of  collaborative  efforts  be-
tween insurers and the relevant NCAs, who may be grant-
ed access to data in the database in real time, as necessary 
granting an updated and unified view of core information 
relevant to the insurance market supervision. In addition, it 
enables more accurate and increased predictive analytics 
for  the  NCAs  to  undertake  better  risk-based  supervision 
and more targeted audits and compliance checks.

25

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEQuestions to stakeholders

9. Do you agree the potential risks for the a) industry, b) consumers and c) supervisors are accurately described?

10. Are there additional risks?

11. Do you consider that the current regulatory and supervisory framework is adequate to capture these risks? If 
not, what can be done to mitigate these risks?

12. Do you agree the potential benefits for the a) industry, b) consumers and c) supervisors are accurately described?

13. Are there additional benefits?

14. What can be done to maximise these benefits?

26

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY7.  REGULATORY BARRIERS IN RESPECT OF 
BLOCKCHAIN AND SMART CONTRACTS

The existing regulations are grounded on centralised gov-
ernance structure while blockchain as a DLT enables a dis-
tributed  governance  structure.  Therefore,  the  effective 
adoption of blockchain could require the amendment of 
the existing regulations. For example Know-Your-Custom-
er  (KYC)  processes  and  requirements  on  legal  archiving 
of  documents.  While  electronic  archiving  of  documents 
is  generally  allowed,  the  compliance  of  blockchain  with 
such requirements needs to be fully assessed. NCAs also 
highlighted  barriers  especially  regarding  data  protection 
legislation (even if justified), e.g. the ‘right to be forgotten’ 
in the GDPR.

As to existing EU law provisions where additional clarity 
might  be  needed,  the  development  of  blockchain  solu-
tions  could  be  delayed  by  the  need  for  an  indisputable 
and  harmonised  interpretation  of  regulations  with  par-
ticular  regard  to  regulatory  perimeter,  customers’  on 
boarding, risk management and consumer protection. E.g. 
the qualification of certain event-based derivative tokens 
could be difficult and applicable compliance rules not cer-
tain. Those tokens could bore similarities with derivatives 
like spread betting, binary options or contract for differ-
ences (CFDs) whilst keeping a certain insurance product 
characteristics.

From  the  Insurance  Distribution  Directive56  (IDD)  per-
spective,  the  assessment  of  suitability  for  the  customer 
for advised sales, and appropriateness for most non-ad-
vised  sales  (except  in  ‘execution  only’)  has  been  men-
tioned.  It  has  also  been  argued  that  product  oversight 
and  governance  (POG)  and  Insurance  Product  Informa-
tion  Document  (IPID)  requirements  might  be  too  com-
plex for simple and standard products, hence there might 

be a need for streamlining the process (without reducing 
customer  protection)  and  improving  the  possibility  to 
share  digital  documentation.  One  NCA  also  mentioned 
the  issue  of  collecting  and  storing  documents  for  iden-
tification and on-boarding of the customer just once (at 
registration) and limit the amount of further data required 
for each product bought on the same platform.

Some  of  the  proposed  barriers  also  stem  from  national 
law. One NCA pointed out that a barrier for smart con-
tracts is the fact that according to national law life insur-
ance contracts are only concluded when the contract is 
signed by the policyholder, the insured person and the in-
surer. Another NCA mentioned national requirements on 
legal  archiving  and  record  keeping  of  documents  which 
might not be possible to fulfil when using blockchain.

So far most of the NCAs have not undertaken any specific 
measures related to barriers, other than using innovation 
facilitators  as  a  fora  for  discussing  possible  blockchain 
and smart contract developments and engaging with the 
industry  to  build  technical  capacity  and  identify  signifi-
cant risks. While the exact scope of those innovation fa-
cilitators vary in different countries, they could be open 
for entities willing to launch their blockchain solutions, or 
include improving the early dialogue with market opera-
tors  when  setting  up  a  new  service  to  discuss  potential 
standards  and  remove  regulatory  barriers.  Interesting 
there  are  also  some  innovation  facilitators  approaching 
directly  blockchain.  Additional  engagement  with  the  in-
dustry seems to be mainly through traditional regular or 
ad-hoc dialogue with the companies on their plans for uti-
lisation of new technologies such as blockchain.

27

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEBOX 7. INNOVATION FACILITATORS FOCUSING ON BLOCKCHAIN

In Italy, a public-private initiative called Insurance Blockchain Sandbox (IBS)57 allows insurance companies and 
brokers to test products, services, processes, business models and distribution models in the real market, with 
real stakeholders (companies and / or customers). Participation takes place on the basis of the single use case 
to be tested, which must have the following requirements: blockchain-based; innovative, allowed by regulations 
in force and with a beneficial impact on the consumers. IVASS is participating as an institutional partner in this 
Sandbox.

Lithuania has created project LBChain that is combination of blockchain sandbox and regulatory sandbox where 
they together with market players can experiment with blockchain products in controlled environment.
Source: EIOPA NCA survey on blockchain

Questions to stakeholders

15. Do you agree the barriers highlighted in this chapter exist?

16. What additional regulatory barriers do you see?

a) in EU insurance legislation;

b) in EU non-insurance legislation.

17. What are in your view the main regulatory and non-regulatory barriers preventing the use of crypto assets in 
insurance?

28

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITY8.  EUROPEAN APPROACH TO BLOCKCHAIN 
AND SMART CONTRACTS IN INSURANCE

This  Discussion  Paper 
identifies  different  aspects, 
use-cases as well as risks and benefits of blockchain and 
smart  contracts  in  insurance  from  supervisory  and  risk 
perspectives, with the aim to start a broader multi-stake-
holder engagement on the topic.

All the emerging technologies identified raise questions 
as  to  whether  existing  regulation  specifically  addresses 
the new possibilities as well as new risks.

are still investigating policy responses through explorato-
ry analysis and discussion papers that analyse the block-
chain  unique  features,  opportunities  and  risks,  different 
use cases, potential implications for insurance market and 
regulatory considerations. This can cause legal uncertain-
ty and act as a barrier to the use of blockchain and smart 
contracts  in  insurance,  but  could  also  lead  to  divergent 
regulatory and supervisory practices and different level of 
consumer protection across the EU.

Indeed,  there  are  a  number  of  features  of  blockchain 
which have the potential to be seen as inconsistent with, 
or  ambiguous  under  current  insurance,  data  protection 
and  civil  law  regulations.  Most  of  the  issues  are  related 
to the nature of blockchain and smart contracts and are 
not specific to the insurance sector. Nonetheless, it may 
be useful to identify possible insurance-specific issues for 
the broader policy debate.

Depending on its application, the use of blockchain and 
smart contracts by insurance undertakings or intermedi-
aries may be subject to various regulations. For example, 
civil law governs basic ownership and contractual rights 
and obligations, potentially also the validity of smart con-
tracts,  whereas  insurance  regulation  dictates  how  the 
industry processes e.g. transactions, payments and how 
it ensures cyber resilience. Data privacy and security and 
consumer  data  transmitted  through  blockchain  is  under 
the remit of privacy/data protection laws.

Smart  contracts  specifically  could  also  raise  regulatory 
and  supervisory  questions  with  their  self-executing  na-
ture which potentially could be damage an insured party 
with  inappropriate  claim  denials,  or  where  a  bug  in  the 
smart contract or tinkering by a cyber-attacker causes the 
contract  to  fail  to  perform  as  intended.  The  immutable 
nature  of  smart  contracts  could  also  pose  again  a  chal-
lenge in terms of the GDPR rights to be forgotten, or in 
an insurance delinquency proceeding, where for example, 
a court-appointed administrator may seek to cut off or de-
lay future claims payments.

Given its wide range of applications and the early stage 
of adoption in the insurance industry, most jurisdictions 

Hence  a  general  European  harmonised  approach  to 
blockchain could promote and facilitate the sound scaling 
of blockchain and smart contracts, including in insurance. 
This approach should achieve coherence with overall con-
sumer protection, financial stability and sound prudential 
regulation objectives and ultimately support a more inte-
grated and efficient European insurance market.

Steps have already been taken in this direction. The Euro-
pean Commission’s Digital Finance Strategy set a target 
that by 2024 the EU should put in place a comprehensive 
framework enabling the uptake of DLT and crypto-assets 
in  the  financial  sector.  To  achieve  this,  the  Commission 
published a proposal for a regulation on markets in cryp-
to-assets  (MiCA)  as  well  as  a  proposal  for  a  regulation 
on  a  pilot  regime  for  market  infrastructures  based  on 
distributed  ledger  technology58  with  the  aim  to  provide 
a  framework  to  allow  for  innovation  in  a  way  that  pre-
serves  financial  stability  and  protects  consumers.  These 
proposals  ultimately  aim  to  help  overcome  some  of  the 
challenges highlighted in this Discussion Paper, especially 
with regards to crypto assets.

In  addition  to  the  above-mentioned  legislative  propos-
als, further actions might be needed in the area of cryp-
to assets at European level, in particular concerning the 
prudential  and  accounting  treatment  of  crypto  assets. 
Indeed  the  accounting  treatment  of  the  different  types 
of crypto assets may require further clarification, taking 
into account that diverse accounting practices could give 
rise  to  different  capital  requirements  under  Solvency  II. 
The  DFS  already  outlines  that  ‘in  light  of  ongoing  work 
carried out by the Basel Committee, the Commission will 
consider  updating  the  prudential  rules  for  crypto-assets 

29

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEheld by financial firms’. It should also be noted that in July 
2020  the  European  Financial  Reporting  Advisory  Group 
(EFRAG) launched a one-year public consultation on the 
accounting treatment for crypto assets (liabilities).59 Pre-
viously,  the  International  Financial  Reporting  Standards 
Interpretations  Committee  (IFRS  IC)  had  analysed  the 
accounting  treatment  of  payment-type  crypto-assets, 
broadly concluding that they should be treated as ‘inven-
tories’ or ‘intangible assets’, but not as ‘financial assets’.60

Furthermore,  there  might  be  also  additional 
insur-
ance-specific issues where further steps might be need-
ed. Hence EIOPA aims to continue facilitating information 
sharing and the identification of main use cases and best 
practices on blockchain and smart contracts in insurance, 
and  related  risks,  barriers  and  opportunities,  as  well  as 
monitoring  future  developments  in  this  area  to  identify 
the trends to ultimately promote level playing field at EU 
level, promote EU convergence of supervisory approach-
es and assess the evolution of these technologies in the 
insurance market.

This  could  include  broader  discussion  on  EU  insurance 
legislation  and  its  application  to  blockchain  and  smart 
contracts, e.g. whether it is fit for purpose to allow block-
chain  use  and  mitigate  relevant  risks  (e.g.  IDD  conduct 

of business and disclosure rules). This could also include 
focusing on the areas of oracles and data vendors, as this 
arguably includes main vulnerabilities for the industry and 
for  consumers.  From  regulatory  perimeter  perspective 
this could also include discussion on common European 
approach on blockchain-based P2P insurance/protection 
products to provide level playing field and sufficient con-
sumer protection.

Additionally,  integrating  these  considerations  on  block-
chain  with  existing  EIOPA  guidelines  (e.g.  Information 
and Communication Technology security and governance 
guidelines61  and  guidelines  on  outsourcing  to  cloud  ser-
vice providers62) could be further explored.

EIOPA will assess the feedback to this Discussion Paper 
in order to better understand the developments and risks 
and benefits related to that. This could also help to pro-
vide informed insurance supervisory specific input for the 
upcoming legislative initiatives foreseen in the European 
Commission DFS. It could also supplement EIOPA´s over-
all work on digitalisation, including work on areas such as 
complex insurance value chain, insurance platforms and 
ecosystems, open insurance, digital ethics and RegTech/
SupTech.

Questions to stakeholders

18. Do you agree there is a need for coherent European approach to blockchain and smart contracts in insurance? 
What could be done to achieve this and specifically what EIOPA could do?

19. Do you consider that there is a case for clarifying or updating the prudential rules for in relation to crypto-assets 
if held by insurance undertakings? Please explain your response. In particular, taking into account the develop-
ments in international financial reporting standards, are you aware of examples where it is not clear how to apply 
insurance prudential rules to crypto assets? Please provide those examples and specify the rules which are not 
clear.

20. Do you agree with the proposed follow-up actions stated in this chapter?

30

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYANNEX 1. CONSULTATION QUESTIONS

1. 

In  addition  to  those  described  in  this  paper,  can 
you report other blockchain and smart contract use 
cases or business models in the EU or beyond, that 
might be worth to look at from supervisory/consum-
er protection perspective?

2.  Please describe your own blockchain/smart contract 
use  case/business  model  and  challenges  you  have 
faced in implementing it, if any.

3.  Are  you  aware  of  practical  examples  of  crypto-as-
sets  use  cases  in  insurance?  Please  describe  these 
use cases, specifying the types of crypto assets con-
cerned (e.g. payment-type, investment-type, or utili-
ty-type) and explain whether they are already being 
implemented or they are still at a proof-of-concept / 
early stage of development.

4.  Without prejudice of your reply to the previous ques-
tion,  are  you  aware  of  insurance  products  covering 
the loss or theft of crypto assets being marketed to 
retail or commercial clients? Please explain your re-
sponse.

5.  How do you think that the investments in crypto as-
sets by insurance undertakings will evolve during the 
next 3 years?

6.  How do you think the European Commission’s draft 
legislative  proposal  on  markets  in  crypto  assets 
(MiCA)  will  impact  the  use  of  crypto  assets  in  the 
insurance sector?

7.  Do you see other blockchain/smart contract use cas-
es in RegTech/SupTech that might be worth to look 
at  further  from  supervisory/consumer  protection 
perspective?

8.  Please describe your own blockchain/smart contract 
use  case/business  model  in  RegTech/SupTech  and 
the challenges you have faced in implementing it, if 
any.

9.  Do you agree the potential risks for the a) industry, 
b)  consumers  and  c)  supervisors  are  accurately  de-
scribed?

10.  Are there additional risks?

11.  Do you consider that the current regulatory and su-
pervisory  framework  is  adequate  to  capture  these 
risks?  If  not,  what  can  be  done  to  mitigate  these 
risks?

12.  Do you agree the potential benefits for the a) indus-
try,  b)  consumers  and  c)  supervisors  are  accurately 
described?

13.  Are there additional benefits?

14.  What can be done to maximise these benefits?

15.  Do you agree the barriers highlighted in this chapter 

exist?

16.  What additional regulatory barriers do you see?

a) in EU insurance legislation;

b) in EU non-insurance legislation.

17.  What  are  in  your  view  the  main  regulatory  and 
non-regulatory barriers preventing the use of crypto 
assets in insurance?

18.  Do you agree there is a need for coherent European 
approach to blockchain and smart contracts in insur-
ance? What could be done to achieve this and specif-
ically what EIOPA could do?

19.  Do you consider that there is a case for clarifying or 
updating the prudential rules for in relation to cryp-
to-assets  if  held  by  insurance  undertakings?  Please 
explain  your  response.  In  particular,  taking  into  ac-
count the developments in international financial re-
porting standards, are you aware of examples where 
it is not clear how to apply insurance prudential rules 
to crypto assets? Please provide those examples and 
specify the rules which are not clear.

20.  Do  you  agree  with  the  proposed  follow-up  actions 

stated in this chapter?

31

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCEANNEX 2. ABBREVIATIONS

AI

AML

API

Artificial Intelligence

anti-money laundering

application programming interfaces

CBDCs

Central Bank Digital Currencies

CFD

DFS

DLT

EIOPA

ESAs

EU

GPS

GDPR

ICT

IDD

IoT

IPID

KID

KYC

MiCA

NCA

P2P

POG

PRIIPs

contract for differences

European Commission Digital Finance Strategy

distributed ledger technology

European Insurance and Occupational Pensions Authority

European Supervisory Authorities (EBA, ESMA and EIOPA)

European Union

global positioning system

General Data Protection Regulation (2016/679/EU)

Information and Communication Technology

Insurance Distribution Directive (2016/97/EU)

Internet of Things

Insurance Product Information Document

Key Information Document

know your customer

proposal for a regulation on markets in crypto-assets (COM(2020) 593)

national competent authority

peer-to-peer

product oversight and governance

Packaged Retail Investment and Insurance Products

32

EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS AUTHORITYENDNOTES

Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets and amending Directive (EU) 2019/1937, 

1 
COM(2020) 593. 

Proposal for a Regulation of the European Parliament and of the Council on a Pilot Regime for market infrastructures based on distributed ledger 

2 
technology - COM(2020)594.

3 
Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Commit-
tee and the Committee of the Regions ‘ Digital Finance Strategy for Europe’, COM(2020)591 http://ec.europa.eu/finance/docs/law/200924-digital-fi-
nance-strategy_en.pdf.

For the sake of simplicity, this Discussion Paper will mainly use the terms blockchain and will distinguish between DLTs where necessary. See more 

4 
in definitions in chapter 2. 

5 

See e.g. OECD Blockchain Primer. See also https://ec.europa.eu/digital-single-market/en/blockchain-technologies.

6 
Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Commit-
tee and the Committee of the Regions ‘ Digital Finance Strategy for Europe’, COM(2020)591 http://ec.europa.eu/finance/docs/law/200924-digital-fi-
nance-strategy_en.pdf

Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets and amending Directive (EU) 2019/1937, 

7 
COM(2020) 593. 

Proposal for a Regulation of the European Parliament and of the Council on a Pilot Regime for market infrastructures based on distributed ledger 

8 
technology - COM(2020)594.

See e.g. BIS 2020, Policy responses to fintech: a cross-country overview https://www.bis.org/fsi/publ/insights23.htm See also The Tokenisation of 

9 
Assets and Potential Implications for Financial Markets, OECD, 2020.

10 

11 

12 

30 Recommendations on Regulation, Innovation and Finance - Final Report to the European Commission, 2019. 

https://www.eiopa.europa.eu/content/discussion-paper-reinsurance-value-chain-and-new-business-models-arising-digitalisation 

Insurance and Distributed Ledger Technology: A risk manager´s guide, CRO Forum, 2019. 

13 
Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority 
(European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ 
L 331, 15.12.2010, p. 48).

14 
See e.g. OECD (2020), The Tokenisation of Assets and Potential Implications for Financial Markets, OECD Blockchain Policy Series, http://www.
oecd.org/finance/The-Tokenisation-of-Assets-and-Potential-Implications-for-Financial-Markets.htm;European Commission, ‘Study on Blockchains: Le-
gal, governance and interoperability aspects’ (SMART 2018/0038). 

Blockchain Now And Tomorrow: Assessing Multidimensional Impacts of Distributed Ledger Technologies, Publications Office of the European 

15 
Union, Luxembourg, 2019.

16 

17 

18 

Ibid. 

See 30 Recommendations on Regulation, Innovation and Finance - Final Report to the European Commission, 2019.

Insurance and Distributed Ledger Technology: A risk manager´s guide, CRO Forum, 2019. 

19 
See European Commission, ‘Study on Blockchains: Legal, governance and interoperability aspects’ (SMART 2018/0038). See also Blockchain Now 
And  Tomorrow:  Assessing  Multidimensional  Impacts  of  Distributed  Ledger  Technologies,  Publications  Office  of  the  European  Union,  Luxembourg, 
2019. 

20  A computer program is deterministic if, given specific input and initial state, it will always generate the same output.

21 

22 

23 

Insurance and Distributed Ledger Technology: A risk manager´s guide, CRO Forum, 2019. 

30 Recommendations on Regulation, Innovation and Finance - Final Report to the European Commission, 2019. 

Insurance and Distributed Ledger Technology: A risk manager´s guide, CRO Forum, 2019. 

24  AI tools could be used to remove the need for physical access to the accident location, with the advanced analysis of photos and other relevant 
evidence.

25  Blockchain and Insurance: New Technology, New Opportunities, ConsenSys Insights, 2019. 

26  https://www.ibm.com/blogs/blockchain/2018/03/three-areas-in-the-insurance-industry-to-use-blockchain/ 

EIOPA Report on Best Practises on Licencing Requirements, Peer-to-Peer Insurance and the Principle of Proportionality in an InsurTech Context, 

27 
EIOPA, 2019 https://www.eiopa.europa.eu/content/report-best-practises-licencing-requirements-peer-peer-insurance-and-principle_en.

See Report on Best Practises on Licencing Requirements, Peer-to-Peer Insurance and the Principle of Proportionality in an InsurTech Context, 

28 
EIOPA 2019, https://www.eiopa.europa.eu/content/report-best-practises-licencing-requirements-peer-peer-insurance-and-principle_en.

29  Blockchain and Insurance: New Technology, New Opportunities, ConsenSys Insights, 2019.

30  Blockchain and Insurance: New Technology, New Opportunities, ConsenSys Insights, 2019. 

See  EIOPA  Discussion  Paper  on  open  insurance:  accessing  and  sharing  insurance-related  data,  2021,  https://www.eiopa.europa.eu/content/

31 
open-insurance-accessing-and-sharing-insurance-related-data_en. 

32 

33 

The product has been developed, but it has not been started until the finalization of this Discussion Paper

https://insurwave.com/ 

34  https://b3i.tech/home.html 

35 

https://www.esma.europa.eu/sites/default/files/library/esma50-157-1391_crypto_advice.pdf

33

DISCUSSION PAPER ON BLOCKCHAIN AND SMART CONTRACTS IN INSURANCE36  https://eba.europa.eu/file/40451/download?token=dD44Fb9A

37 

38 

It is important to note that there are also some hybrid types of crypto assets that can perform different functions at the same time.

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020PC0593

39  Nearly all the relevant assets identified are Bitcoin and Ether ETF trackers invested via unit linked life insurance products. It is important to note 
that the materiality of these investments is very low; based on a more granular analysis performed in Q2 2019, these investments represented less than 
0.2% of the total assets of the two insurance undertakings with a higher exposure to crypto assets.

40 
In order to identify insurance undertaking’s investments in crypto assets, EIOPA has used Solvency II prudential solo reporting data. It has sought 
to identify these investments by assessing the name of the asset, the issuer of the asset, and the list of funds provided by ESMA and by one NCA. Most 
of the relevant assets identified are Bitcoin and Ether ETF trackers. While EIOPA has not identified any investments in other crypto assets like Bitcoin 
cash or Ripple, it is important to note that the identification method used is not comprehensive and does not ensure the detection of all investments in 
crypto assets. For a complete analysis it would be necessary to request undertakings to identify this type of investments, for example via the CIC code, 
which currently does not exist for these types of investments.

41 

https://www.ecb.europa.eu/pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202005_1~3e9ac10eb1.en.html#toc2

42 
In order to address concerns that the multi-currency Libra Coin (LBR) could interfere with monetary sovereignty and monetary policy if the net-
work reaches significant scale and a large volume of domestic payments are made in LBR, the Diem Association recently announced its intention for 
augmenting the Libra network by including single-currency stablecoins in addition to LBR, initially starting with some of the currencies in the proposed 
LBR basket (e.g., LibraUSD, LibraEUR, LibraGBP, LibraSGD).

https://www.lloyds.com/news-and-risk-insight/press-releases/2020/02/lloyds-launches-new-cryptocurrency-wallet-insurance-solution-for-coin-

43 
cover

44  https://www.eiopa.europa.eu/content/supervisory-technology-strategy_en 

45 
See Blockchain Now And Tomorrow: Assessing Multidimensional Impacts of Distributed Ledger Technologies, Publications Office of the European 
Union, Luxembourg, 2019 referring to Kavassalis, P., Stieber, H., Breymann, W., Saxton, K. and Gross, F. (2018), ‘An innovative RegTech approach to 
financial risk monitoring and supervisory reporting’, Journal of Risk Finance, Vol. 19 No. 1, pp. 39-55.

46  E.g. some risks on private permissioned blockchain might be less relevant, but on the public permissionless blockchain the same risks may be more 
relevant.

See in general World Bank Group. 2020. Smart Contract Technology and Financial Inclusion. Fintech Note; No. 6. World Bank, Washington, DC. © 

47 
World Bank. https://openknowledge.worldbank.org/handle/10986/33723 

48  Schär: Decentralized Finance: On Blockchain- and Smart Contract-based Financial Markets 2020:18. 

49  https://www.esma.europa.eu/sites/default/files/library/esma50-164-1284_joint_esas_warning_on_virtual_currenciesl.pdf

See e.g. https://www.coindesk.com/the-flash-loan-attacks-explained-for-everybody and https://blog.coinbase.com/around-the-block-analysis-on-

50 
the-bzx-attack-defi-vulnerabilities-the-state-of-debit-cards-in-1289f7f77137.

See more on AML compliance and blockchain in World Bank Group. 2020. Smart Contract Technology and Financial Inclusion. Fintech Note; No. 

51 
6. World Bank, Washington, DC. https://openknowledge.worldbank.org/handle/10986/33723.

52 
See e.g. P. Paech, The Governance of Blockchain Financial Networks, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2875487 p. 1100. See 
also World Bank Group. 2020. Smart Contract Technology and Financial Inclusion. Fintech Note; No. 6. World Bank, Washington, DC. © World Bank. 
https://openknowledge.worldbank.org/handle/10986/33723.

53 
See EIOPA Discussion paper on (re)insurance value chain and new business models arising from digitalisation, 2020. https://www.eiopa.europa.
eu/content/discussion-paper-reinsurance-value-chain-and-new-business-models-arising-digitalisation_en.  See  also  proposal  for  a  Regulation  of  the 
European Parliament and the Council on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 
648/2012, (EU) No 600/2014 and (EU) No 909/2014 - COM(2020)595. The proposal might help to mitigate some of the risks. 

54  Discussion Paper on open insurance: accessing and sharing insurance-related data, EIOPA 2021, https://www.eiopa.europa.eu/content/open-insur-
ance-accessing-and-sharing-insurance-related-data_en. 

55 
This could also entail certain risks, in particular in view of the numerous reported cases of security issues linked to social media accounts (e.g. 
hacking of social media profile, fake profiles etc.). Hence, eventually providers of social media providers could need to increase their security measures.

56  Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (OJ L 26, 2.2.2016, p. 19–59).

57 

https://www.insuranceblockchainsandbox.com/ 

Proposal for a Regulation of the European Parliament and of the Council on a Pilot Regime for market infrastructures based on distributed ledger 

58 
technology - COM(2020)594

http://www.efrag.org/News/Project-430/EFRAGs-Discussion-Paper-on-the-accounting-for-crypto-assets-liabilities---holder-and-issuer-perspec-

59 
tive

60  https://cdn.ifrs.org/-/media/feature/supporting-implementation/agenda-decisions/agenda-decision-compilations/agenda-decision-compila-
tion-volume-1.pdf

61 

https://www.eiopa.europa.eu/content/guidelines-information-and-communication-technology-security-and-governance_en 

62  https://www.eiopa.europa.eu/content/guidelines-outsourcing-cloud-service-providers_en 

34

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