The Black Platform Value Exchange Overview and Transaction Scenarios

To begin our review of the “Insurance Economy” supported by Black Insurance, we would like to illustrate the high-level, value exchanges that are happening between participants. In the following diagram, we show some of the major participants to the Black Platform, the assets they hold and trade, and the financial obligations they are agreeing to with each other.

NOTE: This diagram does not intend to convey the order that exchanges are occurring in, and is not a comprehensive list of participants and exchanges. This diagram should be used as an introductory illustration of the overall flow of value between some major participants in our solution.

Ordered Transaction Flow

The next diagram illustrates a few of the major transactions that occur in this system and the order in which they occur. Assume all Platform Participants have already purchased Platform Tokens, which are available in each Participant’s Platform Token account. Also, assume that the sale and management of Policies between the Broker and PolicyHolder are largely handled off-Platform in the Broker’s preferred Policy Administration systems, and then registered on the Platform when all Policy details are final.

Transactions by Number:

1. An Investor transfers funds to the Platform from their bank account.
2. An Investor funds a Syndicate in exchange for Syndicate Tokens
   a)Investor transfers on-Platform funds to a Syndicate
   b)Investor pays for this Transaction with Platform Tokens
3. A Syndicate issues Syndicate Tokens to an Investor
   a)Syndicate issues new Syndicate Tokens to an Investor on-Platform
   b)Syndicate pays for this Transaction with Platform Tokens
4. PolicyHolder Premium payments flow through Broker to Syndicate
   a)PolicyHolder’s pay Premiums to Broker by bank transfer
   b)Broker pays Premium to Syndicate by bank transfer
   c)Broker pays for this Transaction with Platform Tokens
5. Syndicate settles Claims with Broker, sends funds by bank transfer
6. Syndicate awards Profits to Broker, Syndicate Manager, and Investors
   a)Syndicate awards Profit to Broker by bank transfer
   b)Syndicate awards Profit / Fees to Syndicate Manager by bank transfer
   c)Syndicate awards Profit to Investors as new Syndicate Tokens

Transaction Scenarios

Starting Conditions

Black Foundation

1. Black creates / controls bank accounts for each Broker, Investor, Syndicate etc

BST Investor pool

1. 2 Accredited and Verified Investors have joined the Platform
2. They each transfer $500K to Black bank account : Sum Investor Accts = $1M
3. Each Investor account is showing $500K on the Black Platform

Syndicate-1

1. Seeking $1M in initial funding to launch BST1
2. Syndicate-1 Funding account has $0 on the Black Platform / at bank

Syndicate-1 agreement with Broker-1 terms

1. Syndicate-1 will underwrite Policies based on Product-A sold by Broker-1
2. Broker-1 can sell new Policies and collect up to $3M of Premium (GWP)
3. Broker-1 commission 15%, profit distribution once a year, for 50% of total profit.
4. Claims under $1000 can be instantly settled; Syndicate-1 approves higher claims

Syndicate-1 defines the BST1 contract

1. Syndicate management costs — 3% of Written premiums
2. Black Platform costs — 7% of Written premiums
3. Syndicate profit distribution (after profit paid to Brokers)

• Executed once a year
• 20% to Syndicate operators as funds distribution
• 40% to BST1 investors as additional BST1 tokens
• 40% is reinvested to Syndicate Capital

Syndicate-1 gets funding from Investor pool to issue BST1

1. 2 Investors commit $500K each to Syndicate-1 on Platform
2. Syndicate-1 issues 1M BST1, transfers to Black, concludes ICO funding process
3. Black makes bank transfers (total $1M) between bank accounts
4. Black transfers 500K BST1 to each Investor

Broker-1 issues a single Policy for Product-A and pays Premium

Broker-1 issues an insurance policy to a customer with insurance premium of $1000 paid in two installments: $500 on T and $500 T+180 days.

• Broker-1 registers the all the policy information on the Black Platform Blockchain
• Black schedules 2 Premium Installments at T and T+180 for the Policy

T

1. The Broker-1 Commission on Black platform is credited with $75 ($500 * 15%)
2. The Broker-1 Unpaid Premium on Black platform is credited $425 (wait for pay)
3. Broker-1 indicates payment to be sent by ‘bank wire transfer’ on Black Platform.
4. Broker-1 pays $425 to Black bank account by ‘bank wire transfer’ (balance $425)
5. The Broker-1 Unpaid Premium on Black platform is debited $425 (balance $0)

T+180

1. The Broker-1 Commission on Black platform is credited with $75 (balance $150)
2. The Broker-1 Unpaid Premium on Black platform is credited $425 (wait for pay)
3. Broker-1 indicates payment to be sent by ‘bank wire transfer’ on Black Platform.
4. Broker-1 pays $425 to Black bank account by ‘bank wire transfer’ (balance $850)
5. The Broker-1 Unpaid Premium on Black platform is debited $425 (balance $0)

NOTE: This scenario illustrated the fund flow for a single Policy, but Brokers usually pay the Premium for multiple Policies at once. Typically, Brokers will indicate which Policies are being paid, and Black will reconcile the incoming Premium payments from Brokers against the oldest unpaid Premium Installments for those Policies.

Claims and Evidence registered on the Blockchain are subject to the following conditions:

• Syndicate Operator configured “Settlement Rules” as a series of mappings in the form : FIELD + CONDITION + FIELD_VALUE + REQUIRED_APPROVAL.
  e.g. “Total Damages <= 1000 (INSTANT)”
  e.g. “Total Damages > 1000 (BASIC)”
  e.g. “Claim Risk Score > 50 (ADVANCED)”
• Claims not instantly settled require Syndicate and Broker to approve
• Broker will handle disbursing Claim settlement funds to PolicyHolders

INSTANT Claim Settlement for $1000 (automated by Syndicate-1 Smart Contract)

1. Syndicate-1 check if submitted Claim satisfies “INSTANT” Settlement rules (Yes)
2. Syndicate-1 marks the Claim ‘Settled’ for $1000 with today’s date
3. Syndicate-1 approves a $1000 transfer to Broker-1 by ‘bank wire transfer’
4. Syndicate-1 lowers Coverage for affected Policy by $1000

BASIC Claim Settlement for $5000 (manual approval determined by Syndicate-1)

1. Syndicate-1 check if submitted Claim satisfies “INSTANT” Settlement rules (No)
2. Syndicate-1 marks the Claim ‘In Review’ with today’s date
3. Syndicate Operator reviews the Claim and Evidence with Broker-1
4. Syndicate Operator and Broker-1 agree to an adjusted settlement of $4500
5. Syndicate Operator marks the Claim ‘Settled’ for $4500 with today’s date
6. Syndicate Operator approves a $4500 transfer to Broker-1 by ‘bank wire transfer’
7. Alternatively, this Claim can be ‘Denied’ by the Syndicate Operator due to fraud, no coverage, or otherwise, no applicability to the in-force Policy.

ADVANCED Claim Settlement (Case-by-Case handling and approval requirements)

1. Syndicate-1 check if submitted Claim requires “ADVANCED” Settlement (Yes)
2. Syndicate-1 marks the Claim ‘In Review’ with today’s date
3. Actual next steps and involved participants vary widely, but will require at a minimum
   a)Syndicate Operator and Broker-1 collaboratively process this Claim
   b)Syndicate Operator and Broker-1 agree on an adjusted settlement
   c)Syndicate Operator marks the Claim ‘Settled’ for a specific amount
   d)Syndicate Operator approves a settlement transfer to Broker-1
4. Alternatively, this Claim can be ‘Denied’ due to fraud, no coverage, or otherwise, no applicability to the in-force Policy.

Monthly consolidated money flows

In this scenario, we are expanding on the “Broker-1 issuing a single Policy” scenario with multiple Policies, and including claim settlement payments, so we will assume that:

• Broker-1 can sell new Policies and collect up to $3M of Premium (GWP).
• Broker-1 successfully sells $250K of Policy Premium each month, for 12 months
• Broker-1 collects Premiums from PolicyHolders and pays Syndicate-1 $250K / mo.
• Broker-1 and Syndicate-1 are able to submit and settle $100K / mo in Claims.
• Policy default / cancellation / prepayment are not included in this simple example

MONTH 1

1. The Broker-1 Commission on Black platform is credited with $37.5K ($250K * 15%)
2. The Broker-1 Unpaid Premium on Black platform is credited $212.5K (wait for pay)

3. Broker-1 selects the Policy Premiums that are being paid in the next funds transfer.

4. Broker-1 indicates payment to be sent by ‘bank wire transfer’ on Black Platform.

5. Broker-1 pays $212.5K to Syndicate-1 bank account by ‘bank wire transfer’

6. The Broker-1 Unpaid Premium on Black platform is debited $212.5K (balance $0)

7. Syndicate-1 settles claims with Broker-1 worth $100K and sends bank wire transfer

MONTH 12

1. The Broker-1 Commission on Black platform is credited with $37.5K ($250K * 15%)
2. The Broker-1 Unpaid Premium on Black platform is credited $212.5K (wait for pay)

3. Broker-1 selects the Policy Premiums that are being paid in the next funds transfer.

4. Broker-1 indicates payment to be sent by ‘bank wire transfer’ on Black Platform.

5. Broker-1 pays $212.5K to Syndicate-1 bank account by ‘bank wire transfer’

6. The Broker-1 Unpaid Premium on Black platform is debited $212.5K (balance $0)

7. Syndicate-1 settles claims with Broker-1 worth $100K and sends bank wire transfer

NOTE: The next few scenarios will focus on Profit Distribution. A Syndicate can compute its current and projected “Profitability” at any time using the algorithm documented in its Smart Contracts. For these next scenarios, we will use the following algorithm:

Profit = Premiums Written — Claims paid from the policies written — Reserves — Black platform costs (7%) — Syndicate management costs (3%)

500K = 3M — 1.2M — 1M — 210K — 90K

We assume a Total Profit of $500K

Syndicate-1 awards Profit to Broker-1

1. Black initiates the Profit Distribution Smart Contract between Syndicate-1 and Broker-1, if date criteria met
2. Black calculates the Syndicate’s Total Profit of $500K (50% for Broker, $250K)
3. Syndicate-1 approves a $250K distribution to Broker-1 by ‘bank wire transfer’

Syndicate-1 awards Profit to Investors

1. Black initiates the Profit Distribution Smart Contract between Syndicate-1 and Investors, if date criteria met
2. Black calculates the Syndicate’s Total Profit of $500K (20% for Investors, $100K)
3. Syndicate-1 creates 100K new BST1 tokens
4. Syndicate-1 transfers portions of the new BST1 to all current Investors

Syndicate-1 awards Profit and Fees to Syndicate Operator

1. Black initiates the Profit Distribution Smart Contract between Syndicate-1 and the Syndicate Operator, if date criteria met
2. Black calculates the Syndicate’s Total Profit of $500K (10% for Operator, $50K)
3. Black calculates Syndicate ‘management fees’ at 3% of GWP as $90K
4. Syndicate-1 approves a $140K distribution to Operator by ‘bank wire transfer’

In this article our aim was to explain in a more detailed way how the different participants transact on our platform.

Black is a digital insurance company on blockchain. Our platform connects insurance brokers directly with capital enabling them to launch their own virtual insurance companies. Thus removing the trusted third parties (Insurance Companies) from the value chain.

For more info on our project and the upcoming ICO please have a look at our website www.black.insure