Schroders Capital, the private markets division of global asset manager Schroders, and Hannover Re, an international reinsurance provider, have launched a tokenised capability within Schroders Capital’s Private Debt & Credit Alternatives (PDCA) insurance-linked securities (ILS) platform.
The announcement includes the completion of what is described as the first real-world collateralised reinsurance transaction executed using this framework.
The development is positioned as a step towards reshaping parts of the global ILS market, which is estimated at around $130 billion. The approach focuses on modernising how collateralised reinsurance arrangements are structured, administered and accessed.
By introducing tokenisation, the model enables the digital representation and management of assets within reinsurance agreements. It also incorporates exposure to money market instruments to support yield generation.
Smart contracts are used to automate processes that have traditionally relied on manual workflows and intermediaries. This is intended to improve transparency and accessibility for participants, while enabling Schroders’ ILS investment strategies to access digitally structured reinsurance instruments.
This development builds on earlier work carried out in 2024, when Schroders Capital and Hannover Re tested a tokenised ILS structure using smart contracts in an internal pilot. That initiative, trialled by Schroders employees, was recognised as the Best Decentralized Finance (DeFi) Initiative at The Digital Banker’s Digital Assets Awards 2024.
The companies state that the newly launched model supports more efficient transaction handling and settlement, enabled by a secure and transparent digital infrastructure.
The initiative forms part of Schroders’ wider focus on developing digital asset capabilities and expanding investment innovation. The firm contributes to Project Guardian, an industry collaboration aimed at shaping digital asset standards, and has also established a Global Digital Assets Centre of Excellence in Singapore.
Flavio Matter, Head of Insurance Linked Securities at 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 at Hannover Re, added: “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.
“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.”
The tokenised capability will be accessible through a selection of Schroders Capital’s core ILS strategies. The project reflects a continued collaboration between Schroders Capital, Hannover Re and i.AM Innovation Lab, all of which also contributed to the 2024 pilot.
The initiative was further supported by Archax, a regulated digital asset platform that acted as broker and provided tokenisation and custody services to enable digital access to returns from the Schroders money market fund.
