Risk Insider: Greg Bangs

No Consensus on Blockchain Standards

By: | May 18, 2017 • 3 min read
Gregory W. Bangs is chief underwriting officer of global crime at XL Catlin. Over the last 30 years, he’s been underwriting insurance and developing new products in the U.S., U.K., Hong Kong and France. He can be reached at [email protected]

Technology has transformed the way many companies transact business. And, with the advent and increasing acceptance of “blockchain” technology, we should expect even more dramatic change.

As R&I’s Roger Crombie noted in his column “The Blockchain Revolution?” there’s been an awful lot of hoopla about blockchain in the insurance industry, yet few really understand it and how it’s going to work.

Originally developed as the technology underlying crypto-currency transactions, blockchain technology may eventually enable greater efficiency, transparency and security in a wide range of industries from financial services companies — including insurers — to many others. Before jumping on the blockchain bandwagon though, there are still some issues and risks to consider.

For one, there’s still a lack of consensus on blockchain standards and no regulatory structure addressing risk transfer and loss allocation. This may create potential exposures that need to be considered when buying insurance. Private and semi-private blockchains also present concerns around determining who has access to potentially relevant transactional information and ensuring that limitations on access are fully in place.

I’ve recently worked with my industry colleagues Scott Schmookler and Katherine Musbach, attorneys with the Chicago-based law firm, Gordon & Rees, to outline some top concerns particularly as they relate to such crimes as fraud. As we see it, while this technology intends to make fraud tougher, using it to transfer securities and negotiable instruments could potentially increase the risk. Every time a document is subjected to a copying process, a small amount of information is lost.

Originally developed as the technology underlying crypto-currency transactions, blockchain technology may eventually enable greater efficiency, transparency and security in a wide range of industries from financial services companies — including insurers — to many others. Before jumping on the blockchain bandwagon though, there are still some issues and risks to consider.

The issue is worsened with multi-generational copies, or copies of copies, many of which contain insufficient quality for examination and comparison. The key to preventing falsification of the blockchain is to make the additions costly and there are many ways to do that.

Also, blockchain transactions may be less likely to receive comprehensive reviews looking for fraud, alteration and forgery. For instance, participating institutions may not receive the original documents on which the transaction is based, and therefore may not have an opportunity to analyze their authenticity. And if the technology evolves such that original documents are no longer provided, that could increase the potential for information to be lost through hacking or through a technological failure.

With a growing number of competing blockchain-based platforms, there is also a potential for assets to be double-pledged or for parties to enter into conflicting transactions. For example, the seller of a promissory note could use one proprietary blockchain-based platform to sell a note. Absent a means to compare transactions effected on one platform against transactions effected on another platform, the same seller could attempt to sell the same note through a different proprietary blockchain-based platform, in essence defrauding the purchaser, who — absent strict verification procedures — could be induced to unknowingly purchase a note the seller did not own.

Blockchain’s efficiency advantages must be weighed against the risks. As more businesses move forward into the brave new world of blockchain technology, they must remain mindful that this is just another means of conducting business transactions, and the time-honored principle of caveat emptor still applies. All those entering into blockchain transactions should do their due diligence.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

This senior risk manager values his role in helping Varian Medical Systems support research and technologies in the fight against cancer.
By: | September 12, 2017 • 5 min read

R&I: What was your first job?

When I was 15 years old I had a summer job working for the city of Plentywood, mowing grass in the parks and ballfields, emptying garbage cans, hauling waste to the dump, painting crosswalk lines.  A great job for a teenager but I thought getting a college degree and working in an air-conditioned office would be a good plan long term.

R&I: How did you come to work in risk management?

I was enrolled in the University of Montana as a general business student, and I wanted to declare a more specialized major during my sophomore year. I was working for my dad at his insurance agency over the summer, and taking new agent training coursework on property/casualty risks in my spare time, so I had an appreciation for insurance. My dad suggested I research risk management for a career, and I transferred sight unseen to the University of Georgia to enroll in their risk management program. I did an internship as a senior with the risk management department at Sulzer Medica, and they offered me a full time job.

R&I: What could the risk management community be doing a better job of?

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We need to do a better job of saying yes. We tend to want to say no to many risks, but there are upside benefits to some risks. If we initiate a collaborative exercise with the risk owners — people who may have unique knowledge about that particular risk — and include a cross section of people from other corporate functions, you can do an effective job of taking the risk apart to analyze it, figure out a way to manage that exposure, and then reap the upside benefits while reducing the downside exposure. That can be done with new products and new service offerings, when there isn’t coverage available for a risk. It’s asking, is there anything we can do to reduce the risk without transferring it?

R&I: What emerging commercial risk most concerns you?

Cyber liability. There’s so much at stake and the bad guys are getting more resourceful every day. At Varian, our first approach is to try to make our systems and products more resilient, so we’re trying to direct resources to preventing it from happening in the first place. It’s a huge reputation risk if one of our products or systems were compromised, so we want to avoid that at all costs.

We need to do a better job of saying yes. We tend to want to say no to many risks, but there are upside benefits to some risks.

R&I: What insurance carrier do you have the highest opinion of?

I’ve worked with a number of great ones over the years. We’ve enjoyed a great property insurance relationship with Zurich. Their loss control services are very valuable to us. On the umbrella liability side, it’s been great partnering with companies like Swiss Re and Berkley Life Sciences because they’ve put in the time and effort to understand our unique risk exposures.

R&I: How much business do you do direct versus going through a broker?

One hundred percent through a broker. I view our broker as an extension of our risk management team. We benefit from each team member’s respective area of expertise and experience.

R&I: Is the contingent commission controversy overblown?

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I think so. The brokers were kind of villainized by Spitzer. I think it’s fair for brokers and insurers to make a reasonable profit, and if a portion of their profit came from contingent commissions, I’m fine with that. But I do appreciate the transparency and disclosure that came out as a result of the fiasco.

R&I: Are you optimistic about the US economy or pessimistic and why?

David Collins, Senior Manager, Risk Management, Varian Medical Systems Inc.

While we might be doing fine here in the U.S. from an economic perspective, the Middle East is a mess, and we’re living with nuclear threat from North Korea. But hope springs eternal, so I’m cautiously optimistic. I’m hoping saner minds prevail and our leaders throughout the world work together to make things better.

R&I: Who is your mentor and why?

My Dad got me started down the insurance and risk path. I’ve also been fortunate to work for or with a number of University of Georgia alumni who’ve been mentors for me. I’ve worked side by side with Karen Epermanis, Michael Rousseau, and Elisha Finney. And I’ve worked with Daniel Dean in his capacity as a broker.

R&I: What have you accomplished that you are proudest of?

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Raising my kids. I have a 15-year-old and 12-year-old, and they’re making mom and dad proud of the people they’re turning into.

On a professional level, a recent one would be the creation and implementation of our global travel risk program, which was a combined effort between security, travel and risk functions.

We have a huge team of service personnel around the world, traveling to customer sites to do maintenance and repair. We needed a way to track, monitor and communicate with them. We may need to make security arrangements or vet their lodging in some circumstances.

R&I: What do your friends and family think you do?

My 12-year-old son thought my job responsibilities could be summed up as a “professional worrier.” And that’s not too far off.

R&I: What about this work do you find the most fulfilling or rewarding?

Varian’s mission is to focus energy on saving lives. Proper administration of the risk function puts the company in a better position to financially support research that improves products and capabilities, helps to educate health care providers and support cancer care in general. It means more lives saved from a terrible disease. I’m proud to contribute toward that.

When you meet someone whose cancer has been successfully treated with one of our products, it’s a powerful reward.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]