To leverage the opportunities for on-chain reinsurance, some hurdles need to be overcome in large organisations, argue Jörg Dirks and Nicky Opitz from Hannover Re at D1Conf. Having undertaken a groundbreaking pilot for on-chain retrocession in collaboration with Schroeders, the team shared their experiences and outlook.Hannover Re is one of the world’s largest reinsurers and a founding member of the Lemonade Crypto Climate coalition, alongside Etherisc.What is retrocession?Put simply: Reinsurance is insurance of insurance. Retrocession is reinsurance of reinsurance (!). This protects the (re) insurer from major losses, thereby protecting its financial stability and therefore share price.What did Hannover Re pilot?The team trialled:Tokenization of insurance contractsEnhancing operational efficiency through automated transactionsEngaging cryptocurrency investors to expand capacity and improve trust.How did it go and what’s next?The pilot went well, with the team working on embedding learnings into their systems and processes. There may be an opportunity to explore regulated digital currencies like the digital Euro and the digital US dollarThe team identified three main hurdles to overcome for large-scale adoption:💥 Lawyers don’t speak code: The legal teams and underwriters can’t read code but rely on paper-based contracts, challenging the legal validity of smart contracts.🐌 Operational Hurdles for new currency: Adoption of a new cryptocurrency involves many departments and processes (accounting, IT, legal, risk…) , which takes forever💰 Who trusts crypto: Whilst existing systems have flaws, they are perceived as more trustable, as trust in cryptocurrencies as collateral is generally low.D1Conf: Hannover Re pilots on-chain retrocession / reinsurance was originally published in Etherisc Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
