Contact person: Max Haran Doyle
Email address: [email protected]
Contact number: +49 17623266948
Asia and ANZ
The Digital Insurer Startup InsurTech Award
The 20 largest OECD countries have a combined public pension deficit of $78 Trillion. Many large corporate pension schemes are likewise significantly underfunded.
With over 44% of men and 55% of women now expected to live into their 90s, many consumers will outlive their private savings by 5 years and some by at least 10 years.
Current retirement income products such as life annuities are unpopular due to low returns mostly caused by the high costs charged by Insurers, which act as centralized “guarantors".
We propose a solution to the costly central guarantor problem by using our patent pending peer-to-peer tontine pensions administered by an unbiased, mathematically robust smart-actuary which ensures that the pension is ALWAYS fully funded. And because tontine pensions provide lifetime income without requiring a guarantor, they significantly reduce the cost of providing pension benefits and thus significantly increase the income paid out to retirees.
Tontines are a 365-year-old financial innovation which successfully financed many European
countries and states as well as numerous private projects such as roads, bridges and hotels. They make periodic payouts shared among their members for as long as they live. In later years, as the number of surviving members declines, the payout per-member rises, often dramatically.
Tontines were first offered in the US in 1868 by insurance companies and they were wildly successful. Over 50% of households invested the modern equivalent of $170Bn before Insurer malpractice caused sales to halt after a 1906 investigation revealing improper uses of capital as well as tampering with the ledger of members which undermined trust in the whole process.
In the century long absence of the tontines, retirement savings rates have plummeted.
2009 saw the emergence of distributed ledger technologies for immutable financial record-keeping which creates a new form of pseudonymous trust between users based upon math.
As such, consumers can now safely and collectively self-insure the financial risks of living longer by entering into secure, low-cost peer-to-peer tontines.
We propose a fully regulated peer-to-peer tontine issuing ecosystem which can offer:
• greater financial benefits payouts to the hundreds of millions of global consumers spending ~$350BN per year on retirement income solutions,
• a digital currency which incentivizes IFAs and RIAs to take no-load tontines to their clients, and
• an un-biased, self-correcting, autonomous smart-actuary which can be trusted to ensure the tontine pension is ALWAYS fully funded and always acts in the best interest of the members.
The use of distributed ledger technologies enables TontineTrust members, and the public
generally, to audit each Tontine’s progress and future monthly payout projections through publicly exposing;
• the location, composition and live value of underlying assets,
• a record of all contributions from and distributions to each of the pseudonymous
• a record of all fees charged,
• the projected medium and long-term payouts that each member can expect.
That the composition (but not the identities) of the Tontine members and the underlying assets will be so publicly visible, analysts and other interested parties are free to audit our past and projected returns and even to contribute suggestions to the project overall.
It is our belief that such radical transparency is the only true guarantee that there is no double counting of assets, no hidden liabilities and that the Tontine, or indeed any financial product, is always-fully-funded for all of the expected payouts.
The Tontine Smart-Contracts are programmed to optimize lifetime payouts to all members with virtually zero insolvency risk, and provide live projections of participants’ expected future monthly payouts for the rest of their life all the way up to their 120th birthday, should they live that long.
The capital in the Tontine is deployed into a diversified portfolio of leading ETF index funds balanced across global markets and asset classes following classical portfolio design theory.
Due to the tontine’s always-fully-funded mandate, its payout will adjust over time in response to actual market returns and mortality experience. In this way, peer-to-peer Tontines remove most of the overhead required of annuity issuers such as capital costs, reserves, and dividends for the shareholders of the insurance company.
Furthermore, in a traditional annuity product, when a member passes away, their capital is in essence transferred to the shareholders of the life insurance company.
In a Tontine, this forfeited capital (also known as “mortality credits”) is instead fairly re-distributed among the surviving members, supplementing their payouts going forward.
For example, in some markets, an estimated 30% of annuity purchaser’s capital “..evaporates on day one..” meaning that peer-to-peer tontines can potentially deliver a 42% higher starting payout ( 100% / (100% – 30%) = 142%). The story is even better when comparing to the current annuity market environment in the UK, in which the initial $4,598 payout from the tontine exceeds the initial $2,990 payout of the escalating fixed annuity by a whopping 53%!
The degree of uncertainty in the level of tontine payouts can be managed and kept low by:
• investing conservatively in a diverse mix of low-correlation asset classes,
• creating a large pool of tontine members (the law of large numbers),
• limiting the rate at which capital is paid out to a rate consistent with mortality credits arising.
Because of the unique characteristics of a centuries-old concept, re-invigorated on the basis of modern technology such as blockchain, artificial intelligence and biometrics, and addressing a significant social problem in the impending retirements savings crisis, we believe that TontineTrust deserves consideration for the StartUp Insurtech Award.