Schroders Capital, Hannover RE Partner on Tokenized ILS Pilot

Schroders Capital, the private markets division of Schroders Group and manager of approximately $5 billion in insurance-linked securities (ILS) assets, has partnered with German reinsurance giant Hannover Re on a pilot tokenization project aimed at improving the way ILS assets are invested and managed.

Schroders Capital tested the effort internally, allowing reinsurance contracts to be tokenized and sold on a public blockchain platform via smart contracts. Using smart contracts, each token represents a share in a reinsurance contract portfolio, demonstrating a potential future for digitalized ILS fund investing.

Schroders stated that tokenizing these contracts enabled various “time-consuming” activities to be automated, including expediting the investing process by automating subscriptions and reducing settlement times.

It follows the investment group’s participation in the Monetary Authority of Singapore’s Project Guardian program last year, as well as the European Investment Bank’s first GBP digital bond issue.

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

The technique incorporated key catastrophe insurance data sources into the smart contract. If specified natural disasters occur, such as hurricanes or earthquakes, or a windstorm, payments are immediately made to the appropriate beneficiary.

The ILS division is part of the firm’s private debt and credit alternatives business, which was formed last year and currently has a value of $30 billion.