Schroders Capital’s Private Debt & Credit Alternatives (PDCA) team, together with global reinsurer Hannover Re, have unveiled the integration of an innovative tokenised capability into its insurance-linked securities (ILS) investment platform, which includes the execution of the first real-world collateralized reinsurance transaction through this platform.
“Through tokenisation, this new development digitises the control and flow of the assets held within the reinsurance agreement, while optimising the yield through money market exposure,” Schroders said.
The tokenised model unveiled today by both Schroders and Hannover Re reportedly delivers significant operational efficiencies for all participants with faster transactions and settlements, via secure and transparent infrastructure.
This model also builds on Schroders Capital’s pilot tokenisation project that was launched in 2024, which the firm also partnered on with Hannover Re, which was designed to enhance the way ILS assets are invested and managed.
“Smart contracts are used to revolutionise the traditional manual, paper-based and intermediated process through automation. This in turn provides more accessibility and transparency for all parties involved, allowing Schroders’ flagship ILS investment funds to gain exposure to a digital form of the reinsurance agreement,” Schroders added.
Schroders Capital also said that the launch of this new tokenised ILS capability represents the next phase of its commitment to innovating investment solutions for the benefit of the firm’s clients.
As well as this, it also forms the latest meaningful advance in Schroders’ digital asset strategy, which is part of the organisations commitment to investment innovation.
Flavio Matter, Head of Insurance Linked Securities, Schroders Capital, commented: “Tokenising reinsurance contracts is a key step to streamlining the ILS market and enhancing its operational efficiency.
“This launch builds on our successful tokenised ILS pilot and will introduce greater transparency, liquidity and scalability to this part of the reinsurance market. With further projects to come in the digitisation space, this also indicates our clear commitment to harnessing the latest innovations to enhance investment solutions for our clients.”
Dirk Heuer, Director Group Protection, Hannover Re, said: “This tokenised transaction provided a valuable opportunity to deepen our understanding of blockchain technology and its application within the reinsurance and retrocession markets. Supported by robust governance frameworks and embedded compliance mechanisms, the deal demonstrated that the associated regulatory and operational risks are comparable to those encountered in traditional market transactions.
Heuer, added: “Although blockchain remains an emerging technology, we expect increasing appetite for blockchain-enabled structures. This transaction therefore represents an important step in positioning us to evolve our approach and build knowledge and capabilities to be prepared for upcoming opportunities in the reinsurance and retrocession industry.”
This tokenised ILS project was a result of a long-term collaboration between Schroders Capital, Hannover Re, and i.AM Innovation Lab who also all contributed to the launch of the 2024 tokenised ILS pilot.
Schroders Capital also stated that this capability was enabled by additional expert input from regulated digital asset platform Archax, who acted as broker and provided the tokenisation and custody needed to facilitate digital access to the yield from the Schroders money market fund.
