8 January 2018Alternative Risk Transfer

ILS manager completes landmark bond trade using blockchain

The Insurance Linked Strategies (ILS) team at Lombard Odier Investment Managers has completed its first bond transaction using blockchain, the immutable ledger for recording transactions.

The team’s purchase of catastrophe bonds is believed to be among the first secondary market transaction completed on blockchain.

The ILS team acquired the securities for the LO Insurance Linked Opportunities Fund via delivery-versus-payment (DVP) settlement from Solidum Partners, an investment advisory company specialising in insurance-linked securities.

Solidum initially issued the bonds in August 2017 using a private blockchain to participants on an invitation-only basis. According to Solidum, the $15 million Dom Re issuance is the first private catastrophe bond transaction to be settled this way.

Simon Vuille, portfolio manager, ILS team, Lombard Odier IM, said: “Using blockchain markedly lowered the transaction costs relative to other DVP settlement methods where costs are prohibitive for transactions of this size. The technology mitigated counterparty risk and accelerated what would have been a partly manual settlement process, reducing what normally takes a few days to a matter of seconds. We hope that this blockchain transaction will be the first of many.”

Stéphane Rey, chief technology officer, Lombard Odier IM, added: “We are always interested in new ways of working and implementing technology that delivers value to the business. Through this blockchain transaction, we have learned more about using the technology and the more practical aspects that needed to be handled, not least legal and compliance to name a few. We are very pleased with the end result.”

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More on this story

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9 January 2018   Mphasis, an IT solutions provider specializing in cloud and cognitive services, has launched a series of blockchain-enabled solutions for insurance and financial services markets.
Insurance
29 December 2017   Blockchain technology was embraced by the re/insurance industry in 2017 as the benefits became apparent, according to executives interviewed by Intelligent Insurer for our year-end questionnaire.
Alternative Risk Transfer
8 August 2017   Solidum Partners, the Switzerland-based investment firm that specialises in helping companies issue private cat bonds, has facilitated the issuance of the first insurance-linked security (ILS) whereby the traditional settlement system has been replaced with the use of blockchain.