Schroders launches tokenised ILS pilot with Hannover Re

Written by Michael Griffiths

05/07/2024

Schroders Capital has launched a new tokenisation pilot designed to enhance the way insurance-linked securities (ILS) investments are invested and managed.

The move comes following a collaboration with reinsurance company, Hannover Re.

Schroders suggested the pilot further builds on its commitment to innovation and leadership in digital assets, after having last year joined the Monetary Authority of Singapore’s Project Guardian, and participating in the first ever GBP Digital Bond issued by the European Investment Bank.

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 may invest through a digital ecosystem in the future.

Earlier this year, Schroders announced that its ILS team is now managing over $5bn in funds as client demand continues to grow.

Co-head of private debt and credit alternatives at Schroders Capital, 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.”

This 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 (GFSC).

“This proof of concept was a great opportunity to understand the capabilities of blockchain technology when applied to the reinsurance market,” managing director retrocession and capital markets at Hannover Re, Henning Ludolphs, added.

“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.”

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