Tokenized reinsurance lowers barriers expands market access

In light of HCI Group’s interest in taking risk on-chain and issuing tokenized reinsurance securities through a new partnership with Oxbridge Re, Chairman and CEO Paresh Patel has highlighted how tokenized reinsurance securities have the potential to expand access to the reinsurance market by lowering investment barriers and shortening investment duration. This strategic initiative follows a partnership established back in June between Oxbridge Re and its subsidiary, SurancePlus, and HCI Group. Together, the parties launched three Solana-based tokenized reinsurance securities that are directly tied to HCI’s recently formed reinsurer, Fortex Reinsurance SPC, Ltd.

Fortex Reinsurance SPC, Ltd., which is domiciled in the Cayman Islands, has actively integrated itself into the company’s operations. At the mid-year renewals, the entity selectively participated in HCI Group’s towers 1 and 3 of its reinsurance program. HCI explained that it launched this pilot project specifically to explore new ways to expand investor access to catastrophe risk as an asset class. The tokens that are set to be issued by SurancePlus, labelled HCI Re 2026 Series A, Series B and Series C, will target annualised investor returns of approximately 243%, 133% and 19%, respectively, assuming no underwriting losses.

As per the details provided by HCI Group, the pricing and redemption structures vary across the different series. The Series A tokens are priced at $11.10 per token with an estimated redemption value of $36.00, while the Series B tokens are priced at $22.12 with an estimated redemption value of $49.00. Additionally, Series C tokens are priced at $30.01 with an estimated redemption value of $35.20. In addition to these financial targets, the securities offer contractual returns designed to mirror the performance of specific participations by Fortex Re in HCI’s catastrophe excess-of-loss reinsurance programs.

Related: Conduit Re trims hurricane risk exposure

The securities are also structured to align with the annual reinsurance treaty cycle. As previously noted, a minimum investment size of $5,000 lowers the capital requirements associated with reinsurance investment participation. Access to these opportunities is segmented by geography and accreditation status: US investors that are eligible accredited investors under Rule 506(c) can participate, while non-U.S. investors participation will be pursuant to Regulation S of the U.S. Securities Act of 1933.

Paresh Patel, HCI’s Chairman and Chief Executive Officer, commented on the strategic direction, stating: “We are pioneering a new method of risk transfer by connecting the reinsurance market with new sources of capital.” He further noted: “While still in its early stages, we believe tokenized reinsurance securities have the potential to expand access to the reinsurance market by lowering investment barriers, shortening investment duration, and creating the potential for increased liquidity for qualified investors.”