Photo by The Future of Reinsurance: Tokenisation and Blockchain Technology
The reinsurance industry is on the cusp of a revolution, thanks to the innovative partnership between Hannover Re and Schroders Capital. The two companies have successfully launched a tokenisation pilot, which enables reinsurance contracts to be traded on a public blockchain platform using smart contracts. This groundbreaking initiative has the potential to transform the way insurance-linked securities (ILS) investments are made.
Reinsurance contracts are going digital
With this pilot, each token represents a share in a portfolio of reinsurance contracts, allowing investors to hold tokens in their digital wallets alongside other digital investments. This integration of crucial catastrophe insurance data into the smart contracts also enables automatic payment triggers in the event of specific natural disasters.
“The success of this pilot showcases the immense potential for enhancing transparency, streamlining investment processes, and improving client experience in the reinsurance sector.” - Stephan Ruoff, Co-Head of Private Debt and Credit Alternatives at Schroders Capital
The implications of this development are far-reaching. It paves the way for a more interconnected and efficient digital ecosystem, with the potential to attract a wider range of investors and increase the liquidity of ILS funds.
Blockchain technology is changing the game
The project, which was the result of over a year of collaboration between Schroders, Hannover Re, and the i.AM Innovation Lab, under the oversight of the Guernsey Financial Services Commission, demonstrates the immense potential of blockchain technology in the reinsurance sector.
“This proof of concept was a great opportunity to understand the capabilities of blockchain technology when applied to the reinsurance market.” - Henning Ludolphs, Managing Director of Retrocession and Capital Markets at Hannover Re
As the industry continues to evolve, it’s clear that blockchain technology will play a significant role in shaping its future. With the ability to increase transparency, efficiency, and accessibility, it’s only a matter of time before we see widespread adoption of tokenised ILS investments.
The reinsurance market is set for a digital makeover
The question on everyone’s mind is, what’s next? As the industry continues to explore the possibilities of blockchain technology, we can expect to see more innovative solutions emerge. One thing is certain, however - the future of reinsurance is digital, and it’s arriving faster than we thought.
