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RWA Platform Re Debuts Tokenized Reinsurance Fund on Avalanche with $15M Commitment from Nexus Mutual

May 13, 2024
  • The new fund backs low-volatility insurances covering properties, trucking, aviation and workers compensation, excluding catastrophic risks at the start, Re CEO Karn Saroya said in an interview.
  • Re targets to back $200 million in insurance premiums by the end of the year, with another $3 billion in the pipeline.
  • The firm also raised $7 million in a venture capital investment round led by Electric Capital.
As an experienced financial analyst with a background in both traditional finance and blockchain technology, I find Re’s entry into the real-world asset (RWA) platform space using tokenized reinsurance particularly intriguing. Re’s decision to focus on low-volatility insurances such as property, trucking, aviation, and workers compensation is a sound one given the current market conditions and the need for stable returns.As a analyst at Re, a specialized RWA platform focusing on tokenized reinsurance, I’m thrilled to announce that we’ve launched our inaugural open-ended reinsurance fund on the Avalanche (AVAX) network this Tuesday.
Nexus Mutual, a crypto insurance provider, has invested $15 million in the fund, while the RWA-focused Vista fund of Ava Labs, an Avalanche ecosystem developer, has made a smaller contribution.

As an analyst, I’d put it this way: In our recent funding round, we successfully secured $7 million in venture capital investment, with Electric Capital leading the charge. This came after our successful $14 million seed round towards the end of 2022.

In the Cayman Islands, Re, which is governed by regulations, is working to bring transparency to an historically secretive and conventional sector through the implementation of blockchain technology. Its ultimate goal is to create a decentralized alternative akin to Lloyd’s of London, renowned as the leading marketplace for insurance.

Reinsurers help insurers manage risk by taking on large portions of their insurance obligations, earning substantial annual premiums totaling nearly $1 trillion, making reinsurance a crucial component of the financial market and business transactions as per Karn Saroya’s interview with CoinDesk.)

“Reinsurance is the ocean, and insurance companies are the boats floating on the water,” he said.

As a crypto investor, I can tell you that moving assets onto the blockchain can significantly enhance settlement processes, increase operational efficiency, and bring more transparency to capital reserves. This aligns with the current trend of tokenization in the digital asset sector. Major players like BlackRock, Citi, and Franklin Templeton are jumping on board by creating digital versions of traditional investments (RWAs) for trading on blockchains, aiming to reap the operational advantages.

At the outset, Re’s latest investment vehicle focuses on less risky insurance types like property, trucking, aviation, and workers compensation. It avoids catastrophic risks, according to Karoya.

This investment fund aims to provide potential returns of up to 23% per year for investors. Eligibility includes U.S. accredited investors and non-U.S. investors who complete Re’s Know-Your-Customer (KYC) procedure. Investments come with a mandatory holding period of one year, but funds can be withdrawn once insurance companies release the collateral for redemption.

Saroa explained that investing in the fund bears resemblance to holding high-yield bonds, thus making it an alluring option for decentralized autonomous organizations (DAOs) and ecosystem funds looking to invest their capital.

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2024-05-14 16:15