Asset manager Lombard Odier was one of the investors that participated in the first blockchain based secondary trade of catastrophe bond notes, as the firm’s ILS investment team purchased a chunk of the near $15 million Dom Re IC Limited 2017 private cat bond.
The Insurance-Linked Strategies (ILS) team at Lombard Odier Investment Managers, the asset management arm of the Lombard Odier Group, said that its purchase of catastrophe bond notes using a blockchain platform is believed to be among the first secondary market transactions completed using a blockchain.
The Lombard Odier ILS team purchased the cat bond securities for the LO Insurance Linked Opportunities Fund through a delivery-versus-payment (DVP) settlement from Solidum Partners AG, the Swiss based catastrophe bond and ILS investment fund manager.
Solidum had issued the Dom Re IC private cat bonds in August 2017 using its own private blockchain (ILSBlockchain) that was made available to participants in the transaction issuance on an invitation-only basis. Solidum said that the Dom re private cat bond issuance was the first to be settled using a blockchain.
Simon Vuille, Portfolio Manager, ILS team, Lombard Odier IM, commented, “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, also said, “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.”
Solidum had previously announced the first ILS secondary trade on a blockchain in December, but at the time it was not clear who the new investor in the private cat bond deal was.
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