Schroders Capital, the private markets division of Schroders Group, has partnered with Hannover Re to conduct a tokenised ILS pilot project.  

The initiative, which has been trialled internally, aims to enhance the investment and management of ILS assets using blockchain technology. 

Schroders Capital said it has successfully tokenised and traded reinsurance contracts on a public blockchain platform.  

By leveraging smart contracts, each token represents a stake in a reinsurance contract portfolio, showcasing a potential future for digitalised ILS fund investments. 

The tokenisation process has automated various time-intensive procedures under the supervision of investment experts.  

For instance, the pilot streamlined the investment process, automated subscriptions and reduced settlement times. 

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Furthermore, the integration of crucial catastrophe insurance data into the smart contracts has enabled automatic payment triggers to the rightful recipients following significant natural disasters such as US hurricanes, earthquakes or European windstorms. 

Schroders Capital highlights that the tokenised ILS pilot could enhance the client experience by improving the accessibility of ILS assets.  

The project is the culmination of more than a year of collaborative work between Schroders, Hannover Re and the i.AM Innovation Lab, all under the supervision of the Guernsey Financial Services Commission. 

Schroders Capital co-head of private debt and credit alternatives Stephan Ruoff said: “The success of this pilot showcases the immense potential for enhancing transparency, streamlining investment processes and improving client experience in the reinsurance sector.  

“It paves the way for a more interconnected and efficient digital ecosystem, and we are looking forward to exploring the broader application to wider investment scenarios and clients.” 

Hannover Re managing director retrocession & capital markets Henning Ludolphs said: “This proof of concept was a great opportunity to understand the capabilities of blockchain technology when applied to the reinsurance market.  

“With strong governance and embedded compliance in place, the pilot also showed that the regulatory and operational risks around blockchain are similar to those of other market transactions. While this is an emerging technology, we anticipate more appetite for blockchain-enabled investments in the future, and this pilot prepares us well to evolve our approach to generate further retrocession capacity via a different source.”