It’s talked about all the time. Ultra-high net-worth individuals seem to always gain access to lucrative and exclusive investment opportunities that bar entry to the rest of society. The exclusion of the majority of the investment community from these opportunities often draws criticism and rightfully so. One such investment class that often falls into this exclusive club is reinsurance.
Reinsurance Market Estimated to Reach Global Valuation of $1.344 Trillion by 2031
Reinsurance is an insurance policy taken out by an insurance company to help transfer risks and help reduce the likelihood of a massive payout when significant losses occur. In other words, it’s an opportunity for insurance companies to hedge their risk from very high claims. This helps insurance firms to free up capital, which can be used for business development rather than being tied up in a reserve fund. In addition, the transfer of risk helps to promote greater financial stability. The reinsurance market is dominated by some big-name companies like Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), Lloyds of London (NYSE: LYG), and more.
As of 2021, the global reinsurance market was valued at around $500 billion. Market research firm, Allied Market Research, estimates the global industry could expand at a CAGR of 10.8% through 2031 and reach a projected value of $1.344 trillion.
For exclusive investors with access to invest in reinsurance, the opportunity is often very lucrative. In fact, Bloomberg recently noted that reinsurance was one of the best-performing strategies for hedge funds in 2023.
However, Oxbridge Re Holdings Limited (NASDAQ: OXBR), through its Web3 subsidiary, SurancePlus Inc., is looking to democratize the reinsurance market. Through Real-World Asset (RWA) tokenization, SurancePlus has already launched its second reinsurance investment opportunity called EpsilonCat Re. Let’s dive in a little deeper to determine how SurancePlus’ tokenized RWA opportunity, DeltaCat Re, of last year, performed and the list of potential benefits.
Overview: SurancePlus Inc.
SurancePlus Inc. is a wholly owned subsidiary of Oxbridge Re Holdings Limited, a Nasdaq-listed reinsurance company based out of the Cayman Islands. Oxbridge Re prides itself in that whilst being a reinsurance holdings company, it seeks opportunities to avail itself of advanced technologies to expand its business. Oxbridge Re was the largest investor in the sponsor of a special purpose acquisition company that successfully merged with Jet.AI Inc (NASDAQ: JTAI), an artificial intelligence and aviation company. Regarding blockchain-related investments, Oxbridge Re launched its Web3 business through its wholly owned subsidiary, SurancePlus Inc., which specializes in RWA tokenization to help democratize access to exclusive investment opportunities that historically have been only available to ultra-high net worth individuals, such as reinsurance.
RWA tokenization continues to gain greater main street attention, particularly after asset management giant, BlackRock (NYSE: BLK), CEO Larry Fink announced the plans to create a new fund in partnership with Securitize, a major player in the RWA tokenization space and the transfer agent for SurancePlus’ DeltaCat Re and its new EpsilonCat Re tokens. It is not initially clear what the new fund, called BlackRock USD Institutional Digital Liquidity Fund, will hold. However, the partnership with Securitize suggests RWA tokenization will play a part of the fund’s focus. In an interview with CNBC back in January, BlackRock CEO Larry Fink said that the firms plan to launch BTC and ETH ETFs, “…are just stepping stones towards tokenization and I really do believe this is where we’re going to be going.”
“We are particularly enthusiastic about the prospects of our venture into RWA tokenization and the direction it sets for our company. Through strategic initiatives undertaken this year, we are positioning ourselves for substantial growth within our SurancePlus subsidiary as a premier RWA Web3-focused entity,” commented Oxbridge Re Holdings President and Chief Executive Officer Jay Madhu. “Further reinforcing our strategic vision, Blackrock has announced its intention to tokenize $10 trillion of its assets. Concurrently, we witness the steady adoption of blockchain technology across traditional financial institutions and asset classes, including fiat currencies, equities, government bonds, and real estate. As pioneers in the RWA tokenization market, we are energized by the transformative potential of our expansion into new business lines, which we believe will create significant value for our shareholders.”
DeltaCat Re Token’s Success Lays Foundation of Successful RWA Tokenization for SurancePlus
SurancePlus became an RWA tokenization pioneer by making available the first tokenized reinsurance securities of its kind to be offered through a subsidiary of a publicly traded company. Its DeltaCat Re tokenized reinsurance securities fractionalized interests in a high-yield pool of reinsurance contracts (underwritten by the subsidiary Oxbridge Re NS) and were issued on the Avalanche blockchain. This accomplishment becomes even more impressive when considering DeltaCat Re investors are on track to secure an annualized return on their investment in excess of 45%, above the initial expectation of a 42% return. This provides a clear track record and a strong foundation for future RWA tokenization opportunities for the company.
Oxbridge Re Holdings, which wholly owns SurancePlus, is subject to regulation by both the SEC and Nasdaq. As a result, the company has its quarterly and annual financial statements reviewed and audited under the Public Company Accounting Oversight Board (PCAOB) guidelines. The PCAOB audit and reviews entails a comprehensive and thorough examination of financial records by a highly qualified and approved accounting firm which provides transparency to investors.
On March 18, 2024, Oxbridge Re Holdings filed a Form 8-K announcing the next digital reinsurance security to be offered through its SurancePlus subsidiary called EpsilonCat Re. Building off of last year’s DeltaCat Re token success, SurancePlus is currently projecting annualized returns for the new token at around 42% if there are no storm losses.
The potential tax benefits of the EpsilonCat Re token will be the same as the previous year’s DeltaCat Re token due to Oxbridge Re’s offshore domicile status. Furthermore, EpsilonCat Re tokens will continue to have the same liquidity options as well. These tokens will be able to achieve liquidity through the sale of the digital securities on a secondary market Alternative Trading System (ATS) when available or can request a redemption at the end of each treaty period which ends on May 31st.
What is the Potential Market Value of SurancePlus?
As a whole, the market currently values Oxbridge Re Holdings Limited at $6.64 million. This is easily determined, as Oxbridge Re is a publicly traded entity on the Nasdaq stock exchange. But, what is the value of SurancePlus on a standalone basis? Being a wholly owned subsidiary and not publicly traded as a separate entity, it can be very difficult to get an exact valuation.
Fortunately, we can look to peers within the insurance tokenization industry to see what valuations they have secured when raising capital, which can be used to guestimate a possible value for SurancePlus. Two key relative peers worth taking a deeper look at are Nayms and Re.xyz.
Nayms
Nayms is an insurance-focused digital assets marketplace. Its platform looks to simplify insurance trading through its integrated platform. The company’s website states, “Through our work so far with the industry we are paving the way in providing a new digital asset risk market that allows regulated brokers and underwriters to find digital asset capital providers to share in the premium and liability entailed in covering digital asset risk.”
In April 2023, the Bermuda-based insurtech company raised a total amount of $12 million at a valuation of $80 million led by UDHC. The capital was earmarked to expand Nayms’ global team, as well as provide further support to develop their crypto-native insurance marketplace.
Re.xyz
Re describes itself as a “blockchain-powered reinsurer,” which is seeking to create a “decentralized Lloyds of London” opportunity. The insurtech startup aims to enable reinsurance companies to bring business to their clients through its Re protocol, which is on the Avalanche blockchain. Re says, “We connect capital, regulators, and insurers, transforming industry operations to enhance transparency and trust. By merging traditional practices with blockchain standardization, we empower all stakeholders in the insurance/reinsurance digital ecosystem to conduct business in their own unique way.”
In September 2022, Re raised $14 million in a seed round at a post-money valuation of $100 million. Investors in the seed round included Morgan Creek Capital, Framework Ventures, and SiriusPoint.
As you can tell, venture capital seems to place a significant premium on blockchain-powered reinsurance trading opportunities, which would likely fall under the decentralized finance (DeFi) heading. Nayms was valued at $80 million and Re at $100 million, based on their recent capital raises. In the context of SurancePlus, which has already begun building a successful track record of reinsurance RWA tokenization, these peer valuations are quite interesting.
SurancePlus Praised in Media Coverage By CoinTrust and Artemis
Oxbridge Re and SurancePlus have seen their share of praise from blockchain and insurance-related publications over the past year. Among the publications that have covered the company and its pioneering RWA tokenization achievements are CoinTrust, Artemis, and Reinsurance News.
In an article from November 2023, CoinTrust issued a glowing review of Oxbridge and SurancePlus in the article titled “Oxbridge Re Holdings Announces Strong Performance in Tokenized Reinsurance Market.” The article’s key conclusion seems to nicely layout the upbeat outlook for the company:
“Oxbridge Re Holdings’ strong performance in the tokenized reinsurance market, marked by the success of SurancePlus, underscores the company’s proactive approach in navigating the evolving landscape of financial technologies. The attractive returns on the tokenized securities issued by SurancePlus position Oxbridge Re Holdings as a noteworthy player in the burgeoning tokenized RWA market. Despite financial losses, the company’s optimism remains unyielding, driven by its strategic focus on key business segments and the promising trajectory of its subsidiaries in the rapidly evolving blockchain-driven financial landscape.”
Artemis, a respected reinsurance industry news provider, has also been keeping up with the news flowing from Oxbridge Re and SurancePlus. Since February 2023, the publication has written at least five articles on the company and its subsidiary on topics such as its DeltaCat Re and EpsilonCat Re tokens, tokenization efforts, and more.
In a recent article on the EpsilonCat Re token announcement, Artemis praised the company’s DeltaCat Re token performance:
“As we reported, towards the end of 2023, Oxbridge Re was anticipating that investors in the first series of tokenized reinsurance securities would receive a roughly 42% return for the first treaty year.
Which was a very impressive headline figure and the company will be hoping it can capitalize on this to raise a larger amount of capital under the EpsilonCat Re series of securities that will be issued for the 2024 renewal at the mid-year.”
Artemis also provided coverage on the DeltaCat Re token’s return of 45%, outpacing initial expectations. The reinsurance publication praised the return particularly after the landfall of Hurricane Idalia, a Category 3 hurricane, in 2023.
Conclusion
As market research experts predict the global reinsurance market to continue growing at a meaningful pace through the next many years, Oxbridge Re and SurancePlus stand to continue capitalizing on their process to democratize the alternative investment opportunity, which has historically been exclusive to only ultra-high net worth individuals. With an established track record of success from last year’s DeltaCat Re token, which is positioned to provide investors with an annualized return of 45%, this could help bring further interest to the company’s EpsilonCat Re token offering.
SurancePlus, the Web3-focused arm of Oxbridge Re Holdings Limited, continues to receive recognition from industry publications for their successful pioneering RWA tokenization achievements in the world of reinsurance. On a standalone basis, SurancePlus’ potential peers, Nayms and Re, have secured meaningful valuations recently, which could provide some guidance and estimate as to the potential value of the Web3-focused business.
Overall, RWA tokenization growth is still in the early innings. Factor in the forecasted growth and demand for reinsurance, and Oxbridge Re may have found an incredible opportunity to capitalize in the coming years ahead.
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