Harneys, the Bermuda-based law firm, plans to issue tokenized catastrophe bonds in early 2027 in partnership with tokenization platform dropRWA. The structure would place the legal ownership of each bond onchain and seek capital for disaster risks that remain expensive to insure.

The proposal lands against a widening protection gap. Natural disasters caused $220 billion in economic losses last year, but insurance covered only $107 billion, according to Swiss Re. Households, businesses and governments absorbed the remaining $113 billion. Reinsurers describe that shortfall as the protection gap, and traditional reinsurance capital has so far failed to close it.

What is the scale of the catastrophe-bond market?

Capital has continued to flow into catastrophe bonds, the instruments that let insurers shift the financial risk of a hurricane, wildfire or earthquake to capital-market investors. The market reached $65.6 billion outstanding in June. New issuance hit $11.3 billion in the second quarter, the largest quarterly total on record, according to Artemis's catastrophe-bond report.

Much of the loss from floods, typhoons and wildfires remains uninsured. In the Asia-Pacific region, 91% of disaster losses in 2023 went uninsured, the Organization for Economic Co-operation and Development reported. Limited claims data and catastrophe models complicate pricing for insurers and reinsurers, especially in high-risk areas.

That data scarcity is one of the structural barriers the firms argue tokenization can ease through broader capital participation.

How would tokenization change investor access?

Each token in the Harneys and dropRWA structure would represent legal ownership of the underlying catastrophe bond. The proposal builds on a market historically available to specialist funds and large institutions. Many offerings carry minimum investments of $250,000 or more.

The firms are weighing a structure that could accommodate smaller beneficial interests, while staying within securities, insurance and investor-protection rules.

Henry Tucker, chief executive of specialist insurance group Hearns, said a tokenized structure does not turn disaster coverage into a casual retail investment. "You're not buying a right to get paid by somebody else who's bet the other way at the casino," Tucker told CoinDesk. The capital is fully committed to cover a defined insurance risk, he added.

Tucker pointed to flood cover and typhoon protection in Southeast Asia as risks difficult to place with conventional reinsurers, particularly when claims data is limited or loss estimates are uncertain. A specialist underwriter could use a tokenized structure to raise capital for a single defined risk and spell out the assumptions and the return offered to investors.

What makes the instrument different from a speculative bet?

A catastrophe bond returns capital plus a coupon only if the specified disaster does not occur within a defined window. A hurricane, earthquake or major flood triggers a payout to the sponsor, typically a reinsurer or sovereign risk pool, and token holders absorb the principal loss. That structure has drawn institutional money because the return profile is uncorrelated with equities and rates, a feature that tokenization alone does not alter.

Is there a precedent for sovereign disaster protection?

Tokenized catastrophe bonds would extend, rather than invent, an existing use case. The World Bank arranged $200 million of hurricane coverage for Jamaica in May, replacing an earlier transaction that paid out after Hurricane Melissa in 2025. Jamaica's finance minister, Fayval Williams, called catastrophe bonds "an important piece ensuring capital market access" for the country's resilience strategy.

The first Harneys and dropRWA issuances, targeted for early 2027, will test whether smaller, token-denominated ownership can channel fresh capital into disaster-risk transfer without diluting the underwriting discipline that has carried the cat-bond market through repeated record catastrophe years.