Hannover Re has partnered with Schroders Capital to launch a tokenisation pilot aimed at enhancing insurance-linked securities (ILS) investments.
The initiative enables reinsurance contracts to be tokenised and traded on a public blockchain platform using smart contracts.
According to Schroders Capital, each token represents a share in a portfolio of reinsurance contracts, showcasing a potential future for ILS funds to operate within a digital ecosystem.
The firm states that a key feature of this pilot is the integration of crucial catastrophe insurance data into the smart contracts, which allows for automatic payment triggers to the appropriate recipients in the event of specific natural disasters.
Additionally, the product allows investors to hold tokens in their digital wallets alongside other digital investments.
The project was the result of more than a year of collaboration between Schroders, Hannover Re, and the i.AM Innovation Lab, under the oversight of the Guernsey Financial Services Commission.
Stephan Ruoff, co-head of Private Debt and Credit Alternatives at Schroders Capital, notes: "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."
Henning Ludolphs, managing director of Retrocession and Capital Markets at Hannover Re, adds: “This proof of concept was a great opportunity to understand the capabilities of blockchain technology when applied to the reinsurance market.
“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.”
