First ILS secondary trade on a blockchain completed

by Artemis on December 4, 2017

Solidum Partners AG, the Swiss based catastrophe bond and ILS investment fund manager, has successfully completed the first ILS secondary trade on a blockchain, after a new investor member joined its private ILSBlockchain and entered into the transaction with one of Solidum’s funds.

ILSBlockchainSolidum Partners completed an innovative private catastrophe bond transaction in August 2017, the $14.8 million Dom Re IC Limited 2017, which was the first such ILS or reinsurance securitisation to be settled using a blockchain solution.

Since the transaction was issued, we understand that Solidum has been seeking to find a counterparty to effect the first ILS secondary trade using its private blockchain, a transaction that has now been completed.

A new participant has joined the ILSBlockchain recently, after Artex Risk Services (Guernsey) Limited, the trustee for assets on the ILSBlockchain, cleared them after performing the required KYC/AML checks and approval process.

The new participant, which now has its own node on the private blockchain, deposited funds into the trust account with Artex and in return Artex credited USD to the participant’s wallet on their ILSBlockchain node.

Solidum Partners AG, on behalf of one of its ILS funds, placed an offer of securities for sale on the ILSBlockchain. Details of the trade were then automatically advertised to the blockchain participants, and one accepted the terms and took the trades cryptographic key, translating it on their own blockchain node and with sufficient USD in place in the wallet completed the transaction, sending the currency and receiving the Dom Re IC ILS notes to their wallet in its place.

In tandem, the ILSBlockchain debited the Solidum ILS fund’s wallet of the offered notes and credited the wallet with the USD.

The ILS secondary trade was executed seamlessly and within a matter of minutes, without the use of a bank or broker-dealer and with no trading fees involved.

The trade also took place with full anonymity, involving no direct contact between the buyer and seller. However all parties could be safe in the knowledge that participants had KYC/AML checks that were performed by a regulated entity.

Trades on the ILSBlockchain can also be performed by a broker-dealer or bank, Solidum explained. Additionally, nodes on the ILSBlockchain could be used by custody banks to hold securities on the private ILS Blockchain for their clients.

The use of blockchain technology to perform a secondary securities trade in the insurance-linked securities (ILS) market is a first and demonstrates how technology can make trading more efficient and cheaper, while still providing the checks and balances required, as well as full anonymity.

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