A blockchain based ‘Catastrophe Bond’ for people affected by volcano-related disasters is to be launched by the Danish Red Cross according to insurance group Howden.
The CAT bond, with a starting value of around $3M is touted to facilitate disaster relief funds to affected areas, but at the time of writing, this only relates to 10 specific volcanos, located in 7 countries: Cameroon, Columbia, Ecuador, Guatemala, Chile, Indonesia and Mexico. The blockchain application is provided by Replexus, a British based security insurance risk firm.
Howden and Mitiga Solutions, a risk modeling agency, helped to create the bond alongside the Red Cross, and the system uses a model which is designed to ‘anticipate the trajectory of volcanic ash clouds using prevailing winds’. Should the model determine that ash is likely to fall toward vulnerable communities, the bond will automatically being pay-outs.
Investors in the CAT bond including Swiss Insurance Investment Advisor Solidum Partners, Plenum Investments and UK Based Schroders.
The volcano CAT bond will be placed on an insurance-linked securities (ILS) blockchain, making the transaction particularly cost-effective for the aid agency and enabling secondary market trading among ILS investors,Cedric Edmonds, CEO Replexus