Harneys and dropRWA plan to issue tokenized catastrophe bonds in early 2027

According to data from Swiss Re, natural disasters caused economic losses of $220 billion last year, with insurance covering only $107 billion, while the rest was borne by households, businesses, and governments. Catastrophe bonds allow insurance companies to transfer the financial risks of hurricanes, wildfires, or earthquakes to capital market investors. According to an Artemis report, as of June this year, the outstanding size of the catastrophe bond market reached $65.6 billion, with new issuances in the second quarter amounting to $11.3 billion, setting a record high for a single quarter.

Bermuda-based law firm Harneys, which focuses on global insurance business, and the tokenization platform dropRWA plan to issue tokenized catastrophe bonds early next year, with each token representing legal ownership of the catastrophe bonds. This scheme is built on the traditional market, where catastrophe bonds were primarily aimed at specialized funds and large institutions, with many products having a minimum investment amount of $250,000 or higher. Both parties are considering structures that can accommodate smaller beneficiary interests, but they still need to comply with securities, insurance, and investor protection regulations.

Henry Tucker from Harneys stated that the tokenized structure will not turn disaster coverage into casual retail investments, and the funds will be used solely to cover specific insurance risks. He pointed out that risks such as floods and typhoon coverage in Southeast Asia are difficult to insure through traditional reinsurance companies, and specialized underwriters can use the tokenized structure to raise funds for a single, specific risk. The World Bank arranged $200 million in hurricane coverage for Jamaica in May.