First blockchain-powered reinsurer gets a funding boost

The team behind insurtech platform Cover has debuted a new venture, and seed investors have bet $14 million that it will work.

Re is a decentralized protocol for investors to gain exposure to insurance premiums. It’s a “massive, uncorrelated asset class” the team wants to make available, Karn Saroya, CEO of Re, told Blockworks.

“This is a decentralized Lloyd’s of London at its highest level,” Saroya said.

The protocol is built on the Avalanche blockchain, Re said. Backing insurance policies (i.e. allowing companies to transfer some of their risk to a larger pool of capital) is nothing new to finance, but bringing it on-chain brings a new level of transparency, speed and security, the team said.

“What we tried to do was mimic a marketplace that has evolved over the last 350 years into what we believe is a stable configuration for current insurance market players,” Saroya said.

While Re’s main application is built on Avalanche’s primary network, private information is stored on a subnet, the team said, to ensure security.

On Avalanche, the subnet architecture satisfies, among other things, the requirements for regulatory compliance.

Res capital providers, known as members, provide financial support to baskets of policies to earn insurance premiums and returns. Members must be accredited investors.

Creating a new DeFi market

The decentralized fund, which takes a page from the massive insurance and reinsurance market Lloyd’s of London, is a capital layer of last call, Saroya said. It offers stop-loss coverage – underwriter protection against large claims – against all programs that are in that marketplace at a given time. The fund, by backing the entire protocol, also earns a steady return, the team said.

“What regulators care about is that somebody is going to be there to pay the claims at the end of the day,” Saroya said.

Re currently has more than $300 million in potential premiums from insurance programs, including supporting drivers in Texas and California, the team said. The company plans to expand coverage to small businesses around the United States in the coming weeks.

Re’s now-closed seed funding round of $14 million featured participation from crypto investment fund Morgan Creek Digital, global insurer and reinsurer SiriusPoint and holding company Exor, Re said. The new round of capital will go towards building out the company’s reinsurance and underwriting pipeline, Re said.

“What we tried to do was make sure we had reinsurers on [capital] table, we wanted to make sure we had crypto people on the cap table, and then traditional betting, so we got a pretty good mix of that,” Saroya said.

Attend DAS:LONDON and hear how the biggest TradFi and crypto institutions see the future of crypto’s institutional adoption. Register here