Tokenized catastrophe bonds target the disaster-insurance gap
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Summary
Catastrophe bonds (cat bonds) are being tokenized by Bermuda-based law firm Harneys and tokenization platform dropRWA, with plans to issue tokenized cat bonds in early 2027. These tokenized versions aim to widen investor access by allowing smaller ownership units while complying with securities, insurance, and investor-protection rules. Cat bonds transfer disaster risks like hurricanes and wildfires to investors, addressing a major insurance gap where only $107 billion of $220 billion in natural disaster losses were covered last year.
Why it matters
The tokenization of catastrophe bonds could expand the investor base beyond specialist funds and large institutions by enabling smaller investments. This could potentially increase capital available to cover disaster risks, especially in underinsured regions like Asia-Pacific, where 91% of disaster losses were uninsured in 2023. However, tokenization does not lower the cost of disaster insurance nor guarantee cheaper coverage for exposed populations.
Key context
Catastrophe bonds have been used to transfer disaster risk from insurers to capital markets, with $65.6 billion outstanding as of June 2026 and record issuance of $11.3 billion in Q2. Large parts of disaster losses remain uninsured, particularly in regions with limited claims data and uncertain loss estimates. Traditional cat bonds typically require minimum investments of $250,000 or more, limiting participation to specialist investors, a limitation tokenization seeks to address.
Key numbers and entities
Catastrophe bond market size: $65.6 billion outstanding (June 2026); $11.3 billion new issuance in Q2 2026. Natural disaster economic losses in 2025: $220 billion; insured losses: $107 billion. Asia-Pacific uninsured disaster losses in 2023: 91%. Notable organizations: Harneys (Bermuda law firm), dropRWA (tokenization platform), Swiss Re, Artemis, OECD, World Bank, Jamaica's Finance Ministry, specialist insurance group Hearns.
What remains unclear
Details on the exact structure of the tokenized catastrophe bonds, including minimum investment size and mechanics of ownership tokens, are not provided. The source does not specify how regulatory compliance with securities, insurance, and investor-protection rules will be managed. It is also unclear how widespread adoption of tokenized cat bonds may become and what impact this will have on disaster recovery outcomes.