Oxbridge Re bullish for “exponential growth” of tokenized reinsurance securities

Oxbridge Re Ltd., the Cayman Islands based reinsurance company, is anticipating that investors in the first series of tokenized reinsurance securities issued by its subsidiary SurancePlus Inc. will receive a roughly 42% return for the first treaty year.

Oxbridge Re broke new ground in creating a Web3 startup named SurancePlus in 2022, to issue tokenized reinsurance securities using the Avalanche blockchain.

The company raised $2.4 million through the sale of the first series of digital or tokenized reinsurance securities, named DeltaCat Re.

The capital was used to support certain collateralized reinsurance contracts, underwritten via its sidecar structure, Oxbridge Re NS.

While small in scale, the securities represented fractionalized interests in reinsurance contracts written by its reinsurance sidecar, Oxbridge Re NS, with investors set to benefit from a return through the performance of the underlying reinsurance contracts that will sit in the sidecar.

With the US wind season drawing to its close soon and Oxbridge Re largely writing reinsurance exposure to Gulf Coast risks, the investors in those securities will be able to benefit from strong performance, if the contract year continues to run clean.

“We are pleased with our operational performance this year and the issuance by our subsidiary SurancePlus, of what we believe are the first Tokenized Reinsurance Securities sponsored by a subsidiary of a publicly-traded company,” explained Oxbridge Re Holdings Chairman and Chief Executive Officer Jay Madhu. “Investors in this year’s tokenized securities issued by SurancePlus are expected to receive an estimated 42% return on their investment in this treaty year.”

Adding, “This initiative is a testament to the success of the significant steps we have taken this year to fortify and diversify our business. The establishment of our new Web3 subsidiary, SurancePlus Inc., stands out as another remarkable achievement. The wholly-owned subsidiary was established without creating any debt or dilution to existing shareholders. We are very excited about the direction and potential of this new venture into RWA (real world asset) tokenization.”

Madhu sees significant potential to grow this Web3 venture, given forecasts for growth of this area of blockchain related activity.

“The company intends to position itself to exponentially grow our SurancePlus subsidiary as a pure RWA Web3 focused company by leveraging the significant steps we have taken this year. This will be done alongside the maintenance of our core and complimentary reinsurance business solutions to insurers in the Florida and the Gulf Coast states. According to forecasts from Boston Consulting Group, the tokenized RWA market is expected to grow exponentially over the next decade, with estimates of $16 trillion by 2030 as traditional financial institutions, including fiat currencies, equities, government bonds and real estate, continue to adopt blockchain technology. As an early entrant into this growing market, we are very excited about the potential our repositioning and new business lines will bring to our shareholders,” he explained.

Oxbridge Re reported that SurancePlus generated $300,000 in incentive, technology, origination and management (ITOM) fees on the token raise of approximately $2.4 million.

The approach is unique and interesting, with no other company utilising digitalised securities as a mechanism for raising capital, insurance-linked securities (ILS) style, to be deployed to support catastrophe reinsurance underwriting.

The 42% headline return potential for the current year is impressive and could serve to attract other investors, with the SurancePlus model perhaps uniquely positioned to attract cryptocurrency investors to deploy capital into catastrophe risk markets.

While many would say that digital or tokenized reinsurance securities are just an added layer of complexity on top of an investment product that is already institutionally focused, Oxbridge Re has to be applauded for pursuing differentiation like this in such a determined manner and it will be interesting to watch its capital raise for a 2024 vintage of the DeltaCat Re tokens.