HCI Group is testing a new way for investors to gain exposure to catastrophe risk through digital tokenised securities.
The securities are linked to reinsurance business written by its Cayman Islands-based subsidiary, Fortex Reinsurance SPC, Ltd.
The pilot programme centres on securities designed to mirror the performance of specific participations by Fortex Re in HCI’s catastrophe excess-of-loss reinsurance programmes.
HCI said the initiative is intended to explore whether digital securities can attract new sources of capital into the reinsurance market and broaden investor access to catastrophe risk as an asset class.
In a press release on 17 June, Paresh Patel, HCI’s chair and chief executive officer, said: “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.”
The initial offering consists of three separate tokenised securities available through SurancePlus.
Series A is priced at US$11.10 per token and has an estimated redemption value of $36.
Series B is offered at $22.12 per token with an estimated redemption value of $49, while Series C is priced at $30.01 and carries an estimated redemption value of $35.20.
According to HCI, those figures assume there are no catastrophe losses affecting the underlying reinsurance participation and that the investment is redeemed at the end of the annual risk period.
The estimates also exclude any additional return generated from collateral investment income.
Each security has its own risk-return profile and can be purchased on its own or combined with other series, allowing investors to adjust their catastrophe risk exposure.
The securities are structured around the annual reinsurance treaty cycle, giving them a shorter investment period than many traditional insurance-linked securities offerings, including catastrophe bonds.
The minimum investment is $5,000. The offering is available to qualified US accredited investors under Rule 506(c) of Regulation D and to qualified non-US investors under Regulation S of the US Securities Act of 1933.
HCI said securities issued under Regulation S are generally expected to become eligible for resale sooner than those issued under Rule 506(c), which are typically subject to holding periods that can extend up to one year.
The company said the securities are synthetically structured to track the performance of specific Fortex Re participations in HCI’s 2026-2027 catastrophe excess-of-loss reinsurance programmes.
