Lombard Odier IM completes its first blockchain bond trade

Believed to be among the first secondary market transaction completed on blockchain, says Lombard Odier IM

THE Insurance Linked Strategies (ILS) team at Lombard Odier Investment Managers (Lombard Odier IM) has completed its first bond transaction using blockchain, the immutable ledger for recording transactions. The team’s purchase of catastrophe bonds is believed to be among the first secondary market transaction completed on blockchain, according to Lombard Odier IM.

“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,” says Stephane Rey, chief technology officer, Lombard Odier IM.

The ILS team acquired the securities for the LO Insurance Linked Opportunities Fund via delivery-versus-payment (DVP) settlement from Solidum Partners, an investment advisory company specialising in insurance-linked securities. Solidum initially issued the bonds in August 2017 using a private blockchain to participants on an invitation-only basis. According to Solidum, the US$15 million Dom Re issuance is the first private catastrophe bond transaction to be settled this way.

Simon Vuille, portfolio manager, ILS team, Lombard Odier IM, says, “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.”