Global Risk Exchange (or "GRE") is a blockchain based, decentralized and open global risk exchange market, with the purpose of helping individuals, companies and organizations to access and trade their risks. GRE completely reconstructed traditional risk management tools(insurance and derivative contracts) in a decentralized way, and will become the underlying operation system to support insurance and derivative transactions in the era of blockchain. First of all, GRE democratize the creation of risk management tools using blockchain based smart contract, enabling any individuals and institutions who has risk management needs to create, trade and shift risks to others who are willing to take on those risks. It’s a platform where risk management policies and transactions are driven by real demands, where individualized and fragmented risk coverages are made possible, and insurance protections are made agile.
Secondly, GRE leverages a blockchain based decentralized exchange to help participants in the risk management contract, insurant(party who pay for premium and sell his risks), insurer(party who receive premium and take on other party's risks) and contract designer(who measures individual risks and design the contract), transact and profit from their own information and understanding of risks. The market price of the risk contract represents the market consensus and the wisdom of the crowd, which is the best measurement of the risk at the moment.
Thirdly, GRE enables a much larger base of insurance capacity providers other than traditional insurance companies and reinsurance companies, which are centralized, tightly regulated and capital intensive. Those new capacity providers can bring more liquidity and information to GRE platform and can profit from GRE by taking on various kinds of risks they understand, while making the whole risk exchange market more efficient by bring bringing down entry barrier for both insurant and insurer, maximizing liquidity and information flow. GRE aims to build the infrastucture and trading platform for risk management industry in the blockchain driven world in the near future, by providing a fundamental protocol for the creation of risk events, pricing, trading, information collection and verdict. It will enable individuals and institutions around the globe to achieve risk and return
equilibrium.
A. Market Size of Global Risk Management
Uncertainty, or risk are the one thing that human society cannot avoid throughout the history and human history are shaped by the way we recognize and manage risks and invent tools to better manage and hedge risks. For individuals, the most familiar tools to manage risks are insurance products, while sophiscated institutional investors and companies will leverage the derivative market to hedge their risks. The insurance and derivative market are the essential components in the global financial maket. Global gorss premium written in 2016 amounted to 4 trillion USD and accounted for 5.7% of global GDP and the same number will approach 4.8 trillion USD in 2017. While the global derivative market size is 1500 trillion USD, compare to the global GDP at 50 trillion USD and market size of global equity and bond market at 100 trillion USD. The nominal value of global derivatives are 30 times the size of global GDP.
B. Problems in the Traditional Risk Management Market
Centralized Product Design and Risk Pricing Leading to Product Homogenization
Traditional insurance products are designed, actuarial priced and soled in a centralized way. The homogeneous product design could not meet the diversified risk management needs of the people; risk pricing for the insurance products are solely relied on the actuarial model and lacks more efficient measurement tools and market; sales in insurance companies are highly dependent on channels. Because of the homogeneneous product design, insurance companies often carry out vicious price competition, resulting in the waste of social and financial resources.
High Sales Channel Cost and Low Cash Efficiency
The traditional model of licensed insurance business relies very much on intermediary channels and a pyramidal corporate structure to maintain control, resulting in high insurance broker agencies fees and operating expenses. All those costs will result in high premium costs for customers, while small and medium-sized insurance companies suffers from low profits or even large losses due to lack of scale and huge overheads.
Low Operating Efficiency
The organizational structure of insurance companies is large and bloated, its decision making mechanism cannot keep up with the ever changing market, the overall operation and innovation ability is low, and the bureaucracy is serious.
User Privacy Protection
Traditional insurance sales process requires insurants to provide a large number of personal information, including ID cards and other sensitive private information, and is centrally stored in the insurance company's database, there is a relatively large risk of information leakage and insider illegal use. A lot of user's private information is acquired by internal personnel and sold for profits.
Misleading Policy Sales and Insurance Fraud
In the course of insurance policy sales, insurance salespeople often deliberately conceal contract terms or even deceive policyholders. Policyholders also conceal their actual situation in order to obtain more favorable coverage ratio or lower premiums. Claim fraud also happen because of the asymmetric information between the insurance companies and policy holders.
Moral Hazard
Buying insurance may change the policyholder's risk preference, resulting in behavior that some insurers do not want to see, for example, car insurance policy holders may instead be more laissez-faire and careless about their driving behavior. No pratical mechanism in the traditional insurance market is in place to solve such moral hazard problem.
C. World’s first blockchain based risk exchange marketplace.
Global Risk Exchange (or "GRE") is a blockchain based, decentralized and open global risk exchange market, with the purpose of helping individuals, companies and organizations to access and trade and manage their risks. GRE completely reconstructed traditional risk management tools(insurance and derivative contracts) in a decentralized way, and will become the underlying operation system to support insurance and derivative transactions in the era of blockchain. GRE aims to build the infrastructure and trading platform for risk management industry in the blockchain driven world in the near future, by providing a fundamental protocol for the creation of risk events, pricing, trading, information collection and oracles to verdict specific risks. It will enable individuals and institutions around the globe to achieve risk and return equilibrium.
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