Insurance and reinsurance-related asset manager Resolute Global Partners has teamed up with insurtech Nayms to bring to market the first cryptocurrency-denominated industry loss guarantee (ILW).
Nayms, which operates a regulated crypto insurance marketplace in Bermuda, said the cryptocurrency-denominated Industry Loss Warranty (ILW) is issued through segregated accounts within its marketplace.
ILW sees Nayms providing reinsurance called storm retrocession in the US with a $60 billion industry loss trigger attached.
Nayms said ILW has been collateralized using the cryptocurrency USD Coin (USDC), a so-called stablecoin, as collateral within segregated accounts.
The segregated account sits on an ethereum smart contract independently audited by Nayms, and the company said the collateral has been secured using new mechanisms and concepts, including a digital multi-signature process for greater transparency and efficiency.
“This transaction is a great example of the benefits our business model and technology can bring to a wide range of parties and opportunities. Notably, insureds have access to alternative capital and investors can earn returns through their cryptocurrency, This return is fully regulated, but independent of most other financial instruments,” explains Dr David Verbeeten, Chief Commercial Officer at Nayms.
Resolute Global Partners Bermuda reinsurer Prospero Re was the purchaser of ILW.
Tom Libassi, Co-Founder and Managing Partner of Resolute Global Partners, commented: “We are proud to partner with Nayms to offer the first cryptocurrency-denominated property catastrophe reinsurance contract. Loss-triggered ILW for catastrophe modeling technology, which provides underwriting for severe losses and provides investors with transparent, timely and efficient access to the real estate catastrophe market.”
Nayms was assisted by Daniel Vestergren, CEO of Varius Capital Partners Ltd. and former head of Hiscox Bermuda ILS, who acted as general counsel on the transaction.
Both the buyer and Nayms were guided by Guy Carpenter, ILW’s exclusive placement broker.
This is another interesting application of smart contracts and crypto in the ILS and reinsurance space, potentially attracting new types of investors who own crypto assets and are looking for alternative sources of returns.