Schroders Capital recently partnered with reinsurer Hannover Re to tokenize a portfolio of reinsurance contracts on a public blockchain as part of a proof of concept. There is a wide range of insurance linked securities (ILS), but one of the simplest types is catastrophe bonds. Cat bonds are used to offload risks of weather events to a wider range of investors. Otherwise a spate of bad weather events could wipe out the reinsurance sector.
Given there’s an emphasis on the tokenization of alternative investments, the ILS sector fits neatly into that category. It is currently a popular investment amongst hedge funds given historically high yields on cat bonds. And Schroders Capital is an originator of ILS, managing $5 billion in funds as part of the $94 billion private markets business.
Schroders emphasized that the company tested the proof of concept on an internal-only basis. The trial involved tokenizing a portfolio of reinsurance contracts with each token representing a share in the portfolio, and the tokens tradable on public blockchain.
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