7 July 2023Innovation

Crypto insurer issues crypto denominated industry loss warranty

Bermuda-based crypto insurer Nayms has issued what it says is the world's first crypto-denominated industry loss warranty through its second segregated account or 'cell' within its crypto-native insurance marketplace.

Nayms said the instrument is index-based and used for providing retrocessional reinsurance protection to property reinsurers.

Nayms said the programme provides coverage for US named windstorm, attaching above a loss trigger of $60 billion. The basic structure aligns with other ILWs, but Nayms said it innovates on the traditional approach by using USD Coin (USDC) as the collateral within the segregated account on its independently audited Ethereum smart contract, and by securing that collateral through new mechanisms and concepts, including a digital multi-signature process, for enhanced transparency and efficiency.

"This deal demonstrates so nicely the benefits of our business model and technology for a broad range of parties and opportunities. Notably, insureds gain access to alternative capital and investors can earn a return on their crypto that is fully regulated yet not correlated to most other financial instruments," said David Verbeeten (pictured), chief commercial officer at Nayms.

The purchaser is Prospero Re, a Bermuda insurer, wholly owned by Resolute Global Partners. For underwriting, Nayms was assisted by the deep domain knowledge of Daniel Vestergren, chief executive officer of Varius Capital Partners and former head of ILS at Hiscox Bermuda, who acted as general advisor. Prospero and Nayms were guided by Guy Carpenter, which acted as sole placing broker.

Tom Libassi, co-founder and managing partner of Resolute Global Partners, said: "We're proud to partner with Nayms to offer the first-ever property catastrophe reinsurance contract denominated in cryptocurrency. This contract is also the first ILW with a loss trigger based on the advanced catastrophe modeling technology behind our Footprint product, which provides coverage for severe losses along with a transparent, timely, and highly efficient way for investors to access the property catastrophe market."

Nayms said the ILW market is part of the larger global property catastrophe reinsurance market, which generates more than $300 billion of annual renewal premium, presenting significant opportunities for insurers, insureds, and investors alike.

Nayms added: "Moving forward on the success of its innovative ILW, Nayms remains committed to deploying emerging technologies to reshape the insurance industry."

The company said it has other prospective segregated accounts including primary insurance for excess cyber liability, primary insurance for smart contract hack and cross-chain bridging failure, captive insurance for smart contract protection services and captive insurance for digital asset recovery services.

Nayms is is licensed in Bermuda for both general insurance and digital assets business.