Marquee Insurance Leads the RWA Wave Building a New Generation of On-chain Insurance System

Marquee Insurance Leading the RWA Wave in Revolutionizing the Insurance Industry with On-Chain Technology

In traditional financial markets, insurance annuity products are widely recognized as investment and retirement planning tools. However, in the recent wave of financial innovation, the digitization and tokenization of insurance annuity products have started to emerge. The Marquee project is driving the construction of a new generation insurance system, providing investors with new opportunities and advantages through innovative insurance Real World Assets (RWA) products, which has significant implications in the financial market.

The Importance of Insurance Annuity Products
Annuities are insurance products designed to help individuals save and manage cash. They are created and sold by financial institutions, which accept and invest personal funds, and then provide a certain amount of cash to the policyholders during annuitization. Annuities consist of two stages: the accumulation stage before annuitization begins and the payment stage after annuitization starts. There are various types of annuity products, but they generally provide insurance coverage for policyholders. The most popular types of annuities are variable annuities, fixed annuities, indexed annuities, and immediate annuities. The importance of insurance annuity products in the financial field is mainly reflected in the following aspects:

1. Retirement Planning:
Insurance annuity products provide investors with a long-term, stable income planning tool, ensuring they can maintain a good standard of living after retirement and meet long-term financial needs, such as buying a house or a car.

2. Long-Term Wealth Management:
These products typically include portfolios of bonds, stocks, and other investments that require long-term management to support pension payments, education expenses, large purchases, and other long-term expenditures.

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3. Risk Management:
The diversified investment portfolios of insurance annuity products help reduce the impact of market volatility on investors and provide more stable investment returns.

4. Asset Inheritance:
Insurance annuity products provide investors with more control over their assets. Beneficiaries can specify the method of receiving benefits and can even establish insurance trusts to customize asset inheritance plans according to actual situations and needs. This helps avoid family property disputes, ensures reasonable asset distribution after death, and provides opportunities for risk avoidance, preventing assets from being used to repay debts and leaving no inheritance for future generations.

In conclusion, insurance annuity products play an important role in the financial market by providing investors with long-term and stable retirement income, as well as assisting in long-term wealth management and risk management. Additionally, they offer more flexibility and control over asset inheritance, helping protect family wealth and mitigate potential risks. Therefore, these products possess irreplaceable value in investment and retirement planning.

The Ingenious Integration of Annuities and RWA

RWA (Real World Asset Tokenization) is a crucial financial innovation that aims to digitize and tokenize various types of real-world assets, enabling them to be traded and circulated on the blockchain. The development of RWA has garnered attention from both traditional financial institutions and the crypto space, as they actively explore how to introduce real-world assets to the blockchain. This trend signifies that the financial market will continue to digitize and further integrate traditional finance with crypto finance.

RWA can serve as an important source of real returns for the crypto market. The on-chain introduction of RWA has the potential to be revolutionary for the crypto market. RWA can provide sustainable and diverse types of real returns supported by traditional assets for the crypto market. RWA can bridge the decentralized financial system of DeFi with the traditional financial system, which means that apart from importing incremental funds to the crypto market, RWA can also gain massive liquidity, vast market opportunities, and immense value capture from the traditional financial market.

RWA assets can be tangible assets or intangible assets such as stocks, bonds, commercial real estate, cars, gold, etc. Given the current market situation, government bond RWA is relatively popular, and insurance annuity products as well as other insurance asset management industries are significant asset categories held by people, which can also be tokenized and brought onto the blockchain through RWA. The introduction of RWA has the potential to have a significant impact on the insurance market and the crypto space, primarily including:

1. Increased Transparency: Digitizing and tokenizing insurance asset management assets and bringing them onto the blockchain improves product transparency. Investors can more easily track their investments and understand the asset portfolio, thereby enhancing trust.
2. Enhanced Liquidity: Digitizing insurance annuity product shares and putting them on the blockchain increases their liquidity, allowing investors to more easily buy and sell shares and reduce transaction costs.
3. Reduced Management Costs: Blockchain technology can lower management costs, and smart contracts can automate many management tasks, reducing the need for manual intervention.
4. No Need for Centralized Intermediaries: Tokenization of insurance RWA eliminates the central intermediaries in traditional transactions, achieving efficient decentralized asset storage and transfer.
5. Support for DeFi Ecosystem Development: Insurance RWA provides more real asset support for decentralized finance (DeFi), enhancing the credibility and attractiveness of DeFi projects.
6. Introducing New Asset Categories: Building on Marquee Insurance RWA can further unlock the potential of insurance RWA assets in the DeFi LEGO.

Short-term-wise, Marquee’s insurance RWA is more about meeting the one-sided demand of users in the encrypted world for traditional insurance annuity products. However, the future will be two-way, on one hand, it will bring real-world insurance annuity products to the chain, and on the other hand, traditional insurance annuity products will also be able to leverage the various technologies and advantages of blockchain to further unleash their potentials.

In summary, Marquee’s insurance RWA product represents the future trend of financial innovation, combining insurance annuity products with blockchain technology to provide investors with more choices and flexibility, while promoting the digitalization and tokenization integration of insurance and finance, and building a new generation of insurance system.

Prospects for the return of insurance RWA

Based on the various development paths presented by bond RWA business models, we have summarized the following business models for insurance RWA, which can bring innovation and growth opportunities to the insurance industry. The following are the main feasible business models for insurance RWA:

Distribution model: In the distribution model, the project party does not directly participate in the packaging process of underlying insurance assets, nor does it provide user KYC services. It mainly attracts customers through encryption in a native manner, focusing on business marketing, fund raising, and the expansion of ecology and application scenarios. This type of model requires the establishment of a fund pool, where users’ funds are collected and then lent out by a single borrower (Marquee) to purchase different types of insurance assets.

Platform model: The platform model requires the project party to provide a series of on-chain, sales, and KYC services, but does not directly participate in the packaging process of insurance assets. These projects usually provide tokenization services for insurance assets and rights, on-chain verifiable information services, and user KYC services. This model is closer to the business model of an internet platform, which can help package various insurance assets and rights from traditional markets.

Infrastructure model: The infrastructure model requires the project party to provide services such as on-chain implementation of insurance RWA, asset purchase, and asset management, but does not directly interact with end users. The main task is to build infrastructure, digitize insurance assets, and introduce them to the blockchain, providing on-chain and management services for other projects.

Self-operated model: The self-operated model requires the project party to independently search for suitable insurance assets, establish business frameworks with external partners, manage asset risks, and tokenize assets or rights. This type of model is usually more complex and requires more efforts in terms of legal and corporate business architecture, but it also offers more control and the ability to proactively manage risks.

Mixed mode: The mixed mode project combines various modes mentioned above, providing on-chain, KYC, and other services, actively seeking insurance assets, and directly offering investment opportunities to users. Projects of this mode typically provide diverse services, including providing funding avenues to financing parties, offering packaged assets, providing governance and treasury management services to other protocols, and providing end-to-end services for RWAs.

RWA, as one of the most promising use cases in the Web3 space, has been attracting attention from both the digital currency and traditional finance industries. US Treasury bonds are currently relatively mature assets in RWAs. US Treasury bonds are considered one of the safest investments in the world, offering fixed returns and minimal risk. By using RWA as collateral, the yields of these bonds can be enhanced while maintaining their low-risk status.

The operation involves investors purchasing Treasury bonds and simultaneously obtaining RWAs representing a portion of the bond value. The RWAs are then stored in a digital wallet or decentralized platform, providing secure and transparent ownership records. Subsequently, investors can use RWA as collateral to borrow funds from lenders at potentially lower interest rates than traditional loans. This approach allows investors to maximize their returns on Treasury bond investments while minimizing risk.

In conclusion, the business model of insuring RWAs is constantly innovating and developing, presenting more opportunities and possibilities for the insurance industry and the crypto sphere.

Since 2019, global economic growth has been slowing down, primarily due to the COVID-19 pandemic, trade tensions, and declining business confidence. The International Monetary Fund (IMF) predicts that global economic growth will reach 3.3% by 2023, higher than the 2.7% in 2022 but still lower than pre-pandemic growth rates. The Federal Reserve’s continuous interest rate hikes have also resulted in increased global financing costs and significantly reduced investment returns. At this time, US Treasury bonds, which serve as a global risk-free benchmark, have become an asset allocation option for most investment institutions.

J. Scott Davis, an economist at the Dallas Fed, believes that short-term US Treasury bonds have little liquidity or interest rate risk compared to long-term ones. Short-term US Treasury bonds can truly be considered safe assets. He points out that during the 2008 financial crisis and the COVID-19 pandemic in 2020, there was a decrease in funds flowing into long-term US Treasury bonds, while funds flowing into short-term US Treasury bonds increased.

However, during times of crisis, the trend of funds flowing out of both short-term and long-term US Treasury bonds is almost consistent and does not show any significant deviations.

In addition, he pointed out that during times of economic turmoil, the US dollar, as the world’s reserve currency, tends to appreciate during crises.

The current level of volatility in the US interest rates is at a historical high. The MOVE index is a yield curve-weighted index that measures the volatility of US Treasury bond options, and it is a commonly used indicator of interest rate volatility. Since mid-2021, the volatility of US interest rates has been steadily rising. Although it has slightly retreated from its high point in March 2023, it is still at a historical high.

The following chart shows the volatility of US Treasury futures standardized by term.

From the above chart, it can be seen that the volatility of US interest rates is at a historical high. High volatility usually indicates strong fixed income returns, which provides excellent opportunities for active fixed income managers.

Marquee Project’s Future Outlook for Insurance RWA

In the future, insurance RWA will face numerous potential development trends, which will shape its future under the drive of digitization and innovation in the financial field:

1. Regulatory compliance: With the digitization of insurance annuity product shares, regulatory compliance will become a crucial factor. Regulatory agencies will continuously adjust laws and regulations to accommodate the development of digital assets and ensure the protection of investors’ rights. Therefore, insurance annuity product share RWAs need to actively comply with regulatory requirements to ensure their legal operation and safeguard investors’ rights.
2. Investor education: Investors need more education and information to have a deeper understanding of the potential risks and returns of digital insurance annuity products. Financial education and information transparency will play a key role in market development, helping to increase investors’ trust and understanding of these new types of products.
3. Collaboration and integration: Collaboration and integration between Marquee, insurance companies, blockchain technology providers, and financial institutions will drive the development and widespread adoption of digital insurance annuity product shares. Cross-industry collaboration helps integrate resources, improve product availability and user experience, thereby accelerating market penetration.
4. Technological innovation: With the continuous development of blockchain technology and smart contracts, more technological innovations will emerge, including more secure methods of identity verification, improvements in smart contracts, and more efficient transaction processing. These technological innovations will enhance the efficiency and availability of insurance annuity products.
5. More asset types: In the future, insurance annuity product share RWAs may expand their asset scope, not limited to government bonds but also including other valuable real assets and digital assets. This will provide investors with more choices and also increase the potential for diversified investment portfolios.
6. Risk modeling and analysis: In the future, more advanced risk modeling and analysis tools may emerge to assess the risk of digital insurance annuity products. This will help investors better understand the risk exposure of their portfolios and take appropriate risk management measures.

Overall, the emergence of RWA in insurance annuity products represents the future trend of digitalization and innovation in the financial sector. These innovations are expected to provide investors with more choices, higher transparency, and lower cost investment opportunities, while also contributing to the modernization and development of the entire insurance and pension industry. To realize these potential development trends, market participants need to actively respond to regulatory challenges, strengthen investor education, promote cross-industry collaboration, and continuously drive technological innovation. Marquee will closely monitor these trends, adapt flexibly, and actively promote innovation to ensure sustainable growth and continuous progress in this field.

Underlying Assets Supported by Marquee Insurance RWA

The initial supported assets for Marquee’s insurance RWA project include the world’s top three insurance companies: AXA, ALLIANZ, ING Group, and AIG, as well as the top three asset management companies: BlackRock, Vanguard, and Fidelity. Firstly, based on its own advantages and market conditions, Marquee supports the digitization and on-chainization of the aforementioned product shares, and then sells these shares to investors (through distribution). In this model, insurance companies are still responsible for managing asset portfolios and paying pensions. Secondly, Marquee itself also provides digital insurance annuity product shares, allowing different institutions and investors to participate, in order to increase market competitiveness and diversity. Finally, Marquee Insurance RWA supports integration with other DeFi platforms: decentralized finance (DeFi) platforms can integrate insurance annuity product shares, allowing investors to buy and sell these shares on decentralized exchanges, while smart contracts can automatically handle pension payments. Various business models will be adopted in the future, as business model diversity helps meet the needs of different investors.

Other Business Needs of Marquee

Marquee’s core design is a peer-to-pool model, with a funding pool and a Vault similar to the (3,3) mechanism. Marquee has a strong demand to bring real-world assets into the crypto world, mainly because real-world assets (especially US Treasury bonds) can provide a stable risk-free income for Marquee’s funding pool and Vault in the macroeconomic background.

Asset management needs: Both the funding pool and Vault have asset management needs, and native on-chain revenues primarily come from staking and borrowing activities. However, in the background of the crypto winter, the sluggish on-chain activities have directly led to a decline in on-chain yield. Against the current backdrop of higher yield rates for US Treasury bonds, Marquee is considering introducing US Treasury RWA. In the new version, Marquee will gradually convert stablecoin assets (with no or low yield) in the funding pool and Vault into interest-bearing assets of US Treasury RWA (5%-7% risk-free yield). This way, the safety of the funding pool and Vault assets can be guaranteed while achieving stable returns.

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