Applications and Use Cases

Danish Red Cross Turns to Blockchain for Volcano Catastrophe Bond

March 23, 2021

The Danish Red Cross recently announced that it would be supporting a $3 million blockchain-based catastrophe bond to support relief for potential volcanic eruptions.

Private investment firms including Solidum Partners and Plenum Investments have joined to support the initiative, and will be working with humanitarian organizations to help provide emergency relief for volcanic disasters that may happen in the future. Currently, this specific bond covers 10 active volcanoes across the globe, such as  Popocatépetl in Mexico, Nevado del Ruiz in Colombia, and Villa Rica in Chile. These specific sites were selected based on population density and city distance from the volcano.

The blockchain technology used for this project has been developed by Replexus, a UK-based platform provider that specializes in insurance risk securitization. Replexus CEO Cedric Edmonds commented on it will be used to support the catastrophe bond, stating,

“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.”

Risk management firm Mitiga Solutions will also be joining the initiative. The company has designed a system to analyze ash plume, wind direction, and other risk factors to determine the risk of communities surrounding active sites. This project follows the rising trend of using crypto and other blockchain technologies to fund humanitarian efforts, such as the American Cancer Foundation’s partnership with The Giving Block to create the first cryptocurrency cancer fund. As blockchain continues to skyrocket in popularity, other organizations will likely develop new ways to use the technology to support natural disasters.

Edited by Maurice Nagle



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