Disaster losses outpace insurance
Natural disasters caused $220 billion in economic losses last year. Insurance covered only $107 billion of that bill, according to Swiss Re. Households, businesses, and governments absorbed the rest. That gap has kept attention on catastrophe bonds, or cat bonds, which let insurers pass the financial risk of a hurricane, wildfire, or earthquake to capital-market investors. The market had $65.6 billion outstanding in June. New issuance reached $11.3 billion in the second quarter, the largest quarterly total on record, according to Artemis.
Why the protection gap persists
Large parts of disaster losses remain uninsured. In Asia-Pacific, 91% of disaster losses in 2023 were uninsured, the OECD said. Limited claims data and catastrophe models can make it harder for insurers and reinsurers to price coverage, especially in high-risk areas. Floods, typhoons, and wildfires often fall into that gap. The result is not just a financial problem for insurers. It leaves governments and families with costs they did not plan for.
Tokenized cat bonds take shape
Harneys, a Bermuda-based law firm focused on global insurance, and tokenization platform dropRWA plan to issue tokenized cat bonds early next year. Each token would represent legal ownership of the catastrophe bond. The proposal builds on a conventional market that has mostly been open to specialist funds and large institutions. Many cat bond offerings carry minimum investments of $250,000 or more. Harneys and dropRWA are considering a structure that could allow smaller beneficial interests. It would still need to comply with securities, insurance, and investor-protection rules.
Not a retail casino bet
Henry Tucker, chief executive of specialist insurance group Hearns, said a tokenized structure does not turn disaster coverage into a casual retail investment. The capital is fully committed to cover a defined insurance risk. He pointed to flood cover and typhoon protection in Southeast Asia as risks that can be hard to place with conventional reinsurers, particularly when claims data is limited or loss estimates are uncertain. A specialist underwriter could use a tokenized structure to raise capital for a single defined risk and set out the assumptions and the return offered to investors.
There is already a public precedent for using catastrophe bonds to finance disaster protection. The World Bank arranged $200 million of hurricane coverage for Jamaica in May, replacing an earlier transaction that paid out after Hurricane Melissa in 2025. Jamaica’s finance minister, Fayval Williams, called catastrophe bonds an important piece ensuring capital market access for the country’s resilience strategy. Tokenized versions may widen the investor base, but the rules, models, and risks still decide whether the market can close more of the insurance gap.
