Harneys and dropRWA Plan Tokenized Catastrophe Bonds for Early 2027

Harneys and dropRWA plan tokenized catastrophe bonds for early 2027

Harneys, a Bermuda-based law firm specializing in global insurance, and tokenization platform dropRWA are planning to issue tokenized catastrophe bonds in early 2027. Each token would represent legal ownership of a catastrophe bond, potentially widening access to this market for smaller investors.

Catastrophe bonds, often called cat bonds, let insurers pass the financial risk of events like hurricanes, wildfires, or earthquakes to capital-market investors. In the traditional market, minimum investments typically start at $250,000 or more, which has limited participation to specialist funds and large institutions.

Tokenization means using blockchain technology to represent legal ownership of an asset as a digital token. In this case, each token on the blockchain would correspond to a legal ownership stake in the catastrophe bond.

Key numbers on the uninsured disaster gap

• Natural disasters caused $220 billion in economic losses last year, but insurance covered only $107 billion, according to Swiss Re.
• The catastrophe bond market had $65.6 billion outstanding in June, with $11.3 billion in new issuance in the second quarter — the largest quarterly total on record, according to Artemis.
• In the Asia-Pacific region, 91 percent of disaster losses in 2023 went uninsured, according to the Organization for Economic Co-operation and Development (OECD).
• Harneys and dropRWA are considering a structure that could accommodate smaller beneficial interests, though it would still need to comply with securities, insurance, and investor-protection rules.

How the proposed structure works

Under the planned issuance, each token would represent legal ownership of a catastrophe bond. The proposal builds on a conventional market that has historically been available to specialist funds and large institutions.

Harneys and dropRWA are exploring how to structure the offering so that smaller ownership units can participate. The product would still be subject to existing securities, insurance, and investor-protection regulations.

What an insurance specialist says

Henry Tucker, chief executive of specialist insurance group Hearns, emphasized that tokenization does not turn disaster coverage into a casual retail investment. He stressed that the capital involved is fully committed to cover a defined insurance risk.

"You're not buying a right to get paid by somebody else who's bet the other way at the casino," Tucker told CoinDesk in an interview.

Tucker pointed to flood cover and typhoon protection in Southeast Asia as examples of risks that are difficult to place with conventional reinsurers, particularly when claims data is limited or loss estimates are uncertain.

Why the coverage gap remains a problem

The gap between disaster losses and insurance payouts is substantial. The OECD notes that limited claims data and catastrophe models make it harder for insurers and reinsurers to price coverage, especially in high-risk areas.

This pricing difficulty contributes to the large share of uninsured disaster losses, particularly in developing regions. A tokenized approach could expand who can participate in catastrophe bond markets, though the sources emphasize the product would remain regulated and aimed at capital providers rather than casual investors.

What comes next

Harneys and dropRWA have stated plans to issue tokenized catastrophe bonds in early 2027. The specific structure, final timing, and regulatory pathway have not been detailed publicly beyond the initial announcement.

Sources

• CoinDesk — Tokenized catastrophe bonds target the disaster-insurance gap