Oxbridge Re Ltd., the Cayman Islands based reinsurance firm with a Gulf Coast risk focus, has begun the initial offering of digital or tokenized reinsurance securities named DeltaCat Re, with the capital set to support collateralized reinsurance contracts underwritten via its sidecar structure, Oxbridge Re NS.
More details on the plans for DeltaCat Re have also been revealed, including the fact the company hopes to make the tokenized reinsurance securities tradable via a secondary marketplace, while planning additional raises through different series of securities over time as well.
We first reported at the beginning of February on Oxbridge Re’s plans to use a newly registered subsidiary SurancePlus Inc. to issue tokenized reinsurance securities that will represent fractionalized interests in reinsurance contracts written by its reinsurance sidecar.
The DeltaCat Re Tokens are being sold to accredited investors in the United States under Rule 506(c) of Regulation D and to non-US investors pursuant to Regulation S, while the investors will benefit from a return on their investment through the performance of the underlying reinsurance contracts that will sit in sidecar vehicle Oxbridge Re NS.
The DeltaCat Re Token offering has now been officially launched, with $5 million sought for the initial placement, we understand.
Cat Re is the series, with DeltaCat Re the first offering from it, and additional tokens set to be launched in years to come.
Oxbridge Re sees a significant opportunity for investors, with returns of 42% possible in the first year, presumably under loss free conditions.
After expenses, the referred return of DeltaCat Re tokens would equal $12.00 per Preferred Share, as well as at least 80% of the profits from the reinsurance contracts collateralized by the net proceeds of the DeltaCat Re offering.
The additional disclosure of a secondary trading opportunity could be helpful to Oxbridge Re’s ambitions for these new digital catastrophe reinsurance linked securities.
The company said that its subsidiary SurancePlus has elected to tokenize its Preferred Shares to facilitate liquidity for investors.
The DeltaCat Re tokens are expected to be made available for trading on a secondary trading platform, using a registered alternative trading system (ATS), the company said.
That suggests they could be open to other accredited investors, which may help to generate some activity around the reinsurance securities, which would be a helpful proof of concept for digital securities transfer and tradability in reinsurance.
“Tokenization of interests in reinsurance contracts is a digital representation of a real-world tradable asset, and we believe that our SurancePlus subsidiary is well-positioned to offer this unique opportunity to investors”, explained Oxbridge Re Holdings President and Chief Executive Officer Jay Madhu.
He added, “Democratizing reinsurance through tokenization allows investors to participate directly in the reinsurance business, which traditionally has extremely high barriers to entry. We believe that SurancePlus’ DeltaCat Re tokens will accomplish such democratization and are offering the majority of the financial benefits to investors whilst providing them with potential liquidity. We also believe that SurancePlus’ capital raise will help create shareholder value for Oxbridge Re by contributing to the ability to underwrite higher value reinsurance contracts.”
There are other initiatives with tokenized reinsurance securities, but they are in the crypto currency space and largely provide insurance capital to back crypto exchange related risks and similar exposures.
Oxbridge Re’s DeltaCat Re tokens are the first to back catastrophe reinsurance risks, so it’s going to be interesting to see how much demand there is for them and whether investors want to try out new ways of accessing ILS-type returns such as this.
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