The initiative will use blockchain technology developed by insurance risk securitisation firm Replexus to provide relief for volcanic eruptions
Several humanitarian organisations have partnered with the Danish Red Cross to sponsor a $3 million-worth volcanic eruption catastrophe bond using blockchain technology. The initiative, which is aimed at offering timely relief in the aftermath of a volcanic eruptions, marks another milestone for the use of crypto and blockchain technologies in furthering humanitarian causes.
CIR Magazine reported earlier today that the catastrophe bond, or cat bond, is being backed by several private firms and humanitarian establishments including significant investments from organisations like Solidum Partners and Plenum Investments.
The cat bond uses blockchain technology developed by insurance risk securitisation firm Replexus to raise funds for humanitarian assistance to expedite its release in the aftermath of a catastrophic volcanic eruption. The bond plans to raise about $3 million and will focus on providing relief in case a disaster strikes the chosen 10 active volcanoes around the world
Popocatépetl in Mexico and Nevado del Ruiz in Colombia, Merapi and Raung in Indonesia, Fuego in Guatemala and Villa Rica in Chile, Mt. Cameroon in Cameroon and Ecuador’s Pichincha, Cotopaxi, and Tungurahua volcanoes are covered by the cat bond and its insurance fund. Reports suggest that the volcanoes for the project have been chosen based on the humanitarian risk in case of an eruption with over 700,000 people living within a 60-mile radius of each volcanic mountain.
“The volcano CAT bond will be placed on an insurance-linked securities blockchain, making the transaction particularly cost-effective for the aid agency and enabling secondary market trading among ILS investors,” Replexus CEO Cedric Edmonds said.
Multi-hazard risk management outfit Mitiga Solutions has developed a modeling system to enable the smooth and speedy distribution of funds. The model determines the risk profile of vulnerable communities surrounding a volcano based on the height of the ash plume generated by the eruption event and the wind direction at the time of the eruption.
The Mitiga system will automatically enable a payout from the cat bond once the ash plume crosses a certain height and the prevailing winds are determined to be blowing in the direction of these communities. A permissioned blockchain created by Replexus will be responsible for dematerializing the bond with the Mitiga system which is publicised as being able to reduce settlement costs by up to $400,000 per bond issuance.