Tokenized catastrophe bonds target the disaster-insurance gap
Financial firms are exploring the use of tokenized catastrophe bonds to bridge the disaster-insurance gap in regions like Asia-Pacific. By allowing smaller investments through blockchain technology, the initiative aims to make disaster risk coverage more accessible and efficient.
Why it matters
Tokenization could democratize access to insurance-linked securities, potentially providing better financial protection against climate-related disasters.
Capital has continued to flow into catastrophe bonds. Catastrophe bonds, or cat bonds, 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 and new issuance reached $11.3 billion in the second quarter, the largest quarterly total on record, according to Artemis’ recent cat bond report .
Yet large parts of the loss from floods, typhoons and wildfires remain uninsured. In the Asia-Pacific, 91% of disaster losses in 2023 were uninsured, according to the Organization for Economic Co-operation and Development (OECD) . It also said limited claims data and catastrophe models can make it harder for insurers and reinsurers to price coverage, particularly in high-risk areas.
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