Schroders Capital and German reinsurer Hannover Re have closed the first live collateralized reinsurance transaction on a new tokenized platform, in a move the two firms believe could reshape how a sizeable chunk of the $130 billion ILS market operates.
The capability, embedded in Schroders Capital's Private Debt & Credit Alternatives platform, targets the way collateralized reinsurance is structured, administered and accessed.
Alternative reinsurance capital deployed through ILS and related collateralized structures has just hit a record, growing 18% in 2025 to $136 billion, Aon's Reinsurance Solutions said last month, with total global reinsurance capital reaching $785 billion.
At the heart of the system is tokenization, which digitizes the control and movement of assets held inside a reinsurance agreement. Smart contracts handle much of the manual, paper-based workflow that has long slowed collateralized deals.
Schroders says the automation speeds up execution and settlement, improves transparency for counterparties, and gives its flagship ILS funds exposure to a digitized version of the reinsurance contract.
The structure also aims to lift returns by putting collateral to work in money markets. The Bank for International Settlements, in recent research, said tokenized money market funds can generate returns "for each instant of time at which collateral was held," thanks to smart contracts that allow continuous rebalancing without intermediaries.
The CFA Institute has argued that such designs cut the "cash drag" of idle balances sitting in pre-funded accounts – a long-running inefficiency in collateralized reinsurance, where trust balances typically stay dormant for the life of a contract.
The launch extends a 2024 proof of concept from the same partners, in which an ILS instrument was tokenized, structured via smart contract and tested internally by Schroders staff. That earlier project, now more than a year old, was named Best Decentralized Finance Initiative at The Digital Banker's Digital Assets Awards 2024.
Collateralized reinsurance, in which investor capital is held in trust to back reinsurance obligations, is one of the biggest pieces of the ILS universe. It sits alongside catastrophe bonds, which saw record issuance of $25.6 billion in 2025 and around $56.7 billion outstanding by mid-year, and property sidecars, estimated by S&P at $17.9 billion of invested capital at year-end.
Supporters of tokenization argue that putting these positions on distributed ledgers shortens reconciliation times and reduces friction between cedents, investors and managers.
Schroders described the rollout as the next stage of its drive to modernize client solutions and a further step in its wider digital asset strategy.
Neither firm disclosed the size of the initial live deal or named other counterparties. The capability is now live on Schroders' ILS platform, with room to support further transactions.
