Schroders Capital, the private markets arm of global asset manager Schroders, and international reinsurer Hannover Re have launched tokenization capabilities within Schroders Capital’s Private Debt and Credit Alternatives (PDCA) insurance-linked securities (ILS) platform.
The announcement includes the completion of what is described as the first real-world mortgage reinsurance transaction executed using the framework.
The development is positioned as a step toward reshaping part of the global ILS market, which is estimated to be worth about $130 billion. The approach focuses on modernizing the way collateralized reinsurance arrangements are structured, managed and obtained.
By introducing tokenization, the model enables the digital representation and management of assets in 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. The move is designed to increase transparency and accessibility for participants while giving Schroders’ ILS investment strategies access to digitally structured reinsurance vehicles.
This development builds on earlier work carried out in 2024, when Schroders Capital and Hannover Re tested tokenized ILS structures using smart contracts in internal pilots. The program was trialled by Schroders employees and was named the best decentralized finance (DeFi) program at the Digital Banker’s 2024 Digital Asset Awards.
The companies said the newly launched model supports more efficient transaction processing and settlement through a secure and transparent digital infrastructure.
The move is part of Schroders’ broader focus on developing digital asset capabilities and expanding investment innovation. The company has contributed to Project Guardian, an industry collaboration to develop digital asset standards, and has also established a global center of excellence for digital assets in Singapore.
Flavio Matter, Head of Insurance Related Securities at Schroders Capital, commented: “Tokenization of reinsurance contracts is a key step towards simplifying the ILS market and making its operations more efficient.
“This launch builds on our successful tokenized ILS pilot and will bring greater transparency, liquidity and scalability to this part of the reinsurance market. With more projects coming in the digital space, it also demonstrates our clear commitment to leveraging the latest innovations to enhance our clients’ investment solutions.”
Dirk Heuer, Group Protection Director at Hannover Re, added: “This tokenization transaction provides a valuable opportunity to deepen our understanding of blockchain technology and its application in the reinsurance and retrocession markets. Supported by a strong governance framework and embedded compliance mechanisms, the transaction demonstrates that the associated regulatory and operational risks are comparable to those encountered in traditional market transactions.
“While blockchain remains an emerging technology, we expect interest in blockchain-enabled structures to continue to grow. This transaction therefore represents an important step in enabling us to develop our approach and build knowledge and capabilities to prepare for upcoming opportunities in the reinsurance and retrocession industry.”
The tokenization functionality will be enabled through a range of Schroder Capital’s core ILS strategies. The project reflects ongoing collaboration between Schroders Capital, Hannover Re and i.AM Innovation Lab, all of which are also contributing to the 2024 pilot.
The initiative is further supported by Archax, a regulated digital asset platform that acts as a broker and provides tokenization and custody services to enable digitized returns from Schroders money market funds.
