Schroders Capital, the US$94 billion private markets business of Schroders Group, has launched a tokenisation pilot designed to enhance the way insurance-linked securities (ILS) investments are invested and managed.
The proof of concept is a collaboration with global reinsurance company, Hannover Re.
The initiative with Hannover Re, which has been tested by Schroders on an internal-only basis, has successfully enabled reinsurance contracts to be tokenised and traded on a public blockchain platform using smart contracts.
Each token represents a share in a portfolio of reinsurance contracts, demonstrating how ILS funds can invest via a digital eco-system in the future.
Tokenising these contracts has, with the consistent oversight of investment professionals, allowed many time-consuming processes to be automated. For example, the pilot group was able to streamline the investment process by automating subscriptions and reducing settlement times.
Through the integration of key catastrophe insurance data sources into the smart contracts, payments to the appropriate recipient are automatically triggered if specific natural disasters occur, such as US hurricanes or earthquakes, or European windstorms.
Stephan Ruoff, co-head of private debt and credit alternatives at Schroders Capital, 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.”
