Tokenized reinsurance securities will lower barriers and expand market access: HCI’s Patel

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.

Back in June, Oxbridge Re and its subsidiary, SurancePlus, partnered with HCI Group to launch three Solana-based tokenized reinsurance securities tied to HCI’s recently formed reinsurer Fortex Re.

Fortex Reinsurance SPC, Ltd., which is domiciled in the Cayman Islands, at the mid-year renewals selectively participated in HCI Group’s towers 1 and 3 of its reinsurance program.

HCI explained that it launched this pilot project 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 HCI Group, 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, and Series C at $30.01 with an estimated redemption value of $35.20.

In addition, 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.

The securities are also structured to align with the annual reinsurance treaty cycle.

As we’ve explained before, a minimum investment size of $5,000 lowers the capital requirements associated with reinsurance investment participation, and 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: “We are pioneering a new method of risk transfer by connecting the reinsurance market with new sources of capital.

“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.”