Clyde & Code: Clyde & Co Launches ‘First Of Its Kind’ Smart Contract
May 28, 2019
2 min read
What's going on here?
Clyde & Co, under its legal and tech hybrid consultancy Clyde Code, collaborated with smart contract platform Clause to launch a ‘first of its kind’ connected parametric insurance contract for a solar energy producer.
What does this mean?
Parametric insurance contracts are agreements to pay a predetermined sum of money on the occurrence of a triggering event (such as catastrophic weather conditions). It is particularly suitable in sectors at the mercy of volatile weather conditions, as with Clyde & Co’s client, which is a solar energy producer.
What is innovative and “smart” about this contract is that it integrates real-time weather data (in this case, hurricane wind speed, central pressure, temperature, rainfall) so that when a parametric mechanism is triggered, the smart contract will automatically execute the performance of the insurance policy. At the same time, it calculates any potential claim obligations as well as producing a report on insurance premium or losses from the live data provided.
What's the big picture effect?
Lee Bacon (Partner at Clyde & Co and founder of Clyde Code) says that these contracts will “offer significant cost and efficiency gains for the [insurance] industry”. Unlike traditional insurance coverage, smart self-executing contracts do not require a claims adjuster to investigate and determine the pay-out sum. As contracts are uploaded on the Ethereum blockchain (a public contracts ledger which is regularly updated with live data), they offer the benefit of speed, transparency and certainty, bringing time-saving benefits as well as minimising the costs of doing business in highly volatile industries.
All in all, this move is yet another example of how smart contract technology is now being taken seriously by major law firms. Clyde & Co adds that it will use this model to develop connected contracts for different types of insurance and reinsurance agreements, expanding the scope of application of smart contract technology in the insurance sector.
Report written by Roslyn L
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