Blockchain Adoption and Optimal Reinsurance Design

35 Pages Posted: 1 Sep 2021 Last revised: 15 Jun 2022

See all articles by Hamed Amini

Hamed Amini

University of Florida

Romain Deguest

IESEG School of Management

Engin Iyidogan

SKEMA Business School - Univ Cote d'Azur

Andreea Minca

Cornell University

Date Written: August 30, 2021

Abstract

We study blockchain adoption in insurance-reinsurance markets. Unlike standard operational costs related to claim processing that scale linearly with the volume of claims, blockchain operating costs per firm are independent of claim volume and decrease with the adoption rate since verification and storage costs are distributed among the adopters. In a consortium of insurance firms, we quantify how the equilibrium adoption decisions depend on the reinsurance contract characteristics, the risk aversions of insurance companies, the distributions of their potential losses and the blockchain cost structure. When a reinsurance firm acts as a central planner in the blockchain consortium, the optimal adoption rate from planner’s viewpoint is higher than the Nash equilibria adoption rate. We observe that this gap widens when the blockchain cost becomes more sensitive to the adoption level.

Keywords: Blockchain, Nash Equilibrium, Insurance-Reinsurance, Technology Adoption, FinTech

JEL Classification: C70, G22, O33

Suggested Citation

Amini, Hamed and Deguest, Romain and Iyidogan, Engin and Minca, Andreea, Blockchain Adoption and Optimal Reinsurance Design (August 30, 2021). Available at SSRN: https://ssrn.com/abstract=3914284 or http://dx.doi.org/10.2139/ssrn.3914284

Hamed Amini (Contact Author)

University of Florida ( email )

University of Florida
Gainesville, FL 32611
United States

Romain Deguest

IESEG School of Management ( email )

3 rue de la Digue
Lille, 59000
France

HOME PAGE: http://sites.google.com/view/romaindeguest

Engin Iyidogan

SKEMA Business School - Univ Cote d'Azur ( email )

Lille
France

HOME PAGE: http://sites.google.com/view/enginiyidogan

Andreea Minca

Cornell University ( email )

222 Rhodes Hall
Ithaca, NY NY 14853
United States

HOME PAGE: http://people.orie.cornell.edu/acm299/

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