Blockchain eBonding Solutions Moving Toward Reality

Surety Bond Powers of Attorney Blockchain Solution

I am pleased to inform you that the work of The Institutes’ RiskStream Collaborative, a consortium working on the application of blockchain technology to insurance and surety processes, continues to make substantial progress on its proof-of-concept for a blockchain enabled surety bond powers of attorney (POA) repository solution. As you may recall from past communications, RiskStream Collaborative worked last year to conceptualize and define a way in which blockchain technology could facilitate and make more efficient and trusted the processes surrounding surety bond powers of attorney, creating a bridge for disparate systems to interact with one another.

After conducting exploration of that subject with a diverse group of surety stakeholders, examining a number of possible use cases related to surety, which included NASBP representatives and many NASBP agencies, the effort moved to defining a proof-of-concept for a blockchain technology powered POA repository system. This year, starting in January, RiskStream Collaborative has facilitated a series of workshops and meetings, called Surety Bonds–Power of Attorney Lab Phase 2, to gather the necessary input and feedback from surety professionals to refine and flesh out the proof-of-concept environment.

In simple terms, the proof-of-concept imagines a system in which attorneys-in-fact may be managed, powers of attorney processed, and all transactional history recorded. To that end, a surety agency will be able to add, remove and change attorneys-in-fact from existing surety company powers of attorney. The surety agency may submit a request to the surety company through the system, the surety company may accept or decline the pending request, and the surety agency, in turn, may accept or decline any subsequent power of attorney. Agency approved powers of attorney are recorded on the blockchain, which mints a nonfungible token, marking that transaction as unique, and the system database is updated accordingly. A PDF of the power of attorney would be available to download and view.

The system contemplated in the proof-of-concept environment also would permit an obligee to validate a particular power of attorney generated through the system. Surety agencies would be able to view the status of different powers of attorneys and the power of attorney histories of individual attorneys-in-fact. Surety companies would have the assurance of complete audit histories for every power of attorney generated and approved.

In recent weeks the proof-of-concept POA platform is being tested to ensure that the system has all the characteristics needed and that it functions as intended. Once testing is concluded and reporting issues analyzed, the case will be made to move toward production.

Digital Bonds Using Blockchain Solution 

Not as far along, but on a similar track is the RiskStream Collaborative initiative on digital surety bonds using blockchain technology. Again facilitated by RiskStream, another working group of surety and other professionals, including NASBP representatives and agencies, convened and began the process of envisioning a blockchain environment to deliver and to verify digital bonds. This Phase 1 process is underway and will conclude towards the end of April, after which, the process will move to a Phase 2 lab, focused on building a proof-of-concept for this use-case. For more information, view the previously recorded Surety Bond Delivery & Verification Phase 1 Lab Zoom meeting.

Please note that the Phase 2 process is a “cost coverage model” where participants are asked to support the funding of the build out of the proof-of-concept. Individual agencies are asked to express to RiskStream Collaborative interest in participating in the proof-of-concept process by Friday, April 22, though I am sure that expressions of interest shortly thereafter will be entertained.

These incredibly exciting and important developments portend good things to come. You may learn even more (and no doubt have many of the questions you may have answered) by attending the Tuesday, May 3 General Session from 10:40 am to 11:45 am, entitled “What the Hell is Blockchain and Why Do We Keep Talking About It,” at the upcoming NASBP Annual Meeting in Palm Desert, CA. Presenters Robert Coon of NASBP member Scott Insurance and Greg Davenport of NASBP affiliate Liberty Mutual Surety will give a thorough rundown of all that is happening in these efforts to move us toward a promising digital future.