Oxbridge Re Holdings Limited (OXBR) is a Cayman Islands-based company that is at the forefront of tokenizing real-world assets (RWAs), with a focus on the reinsurance industry. Through its subsidiary, SurancePlus, Oxbridge Re is leveraging blockchain technology to democratize access to the historically exclusive reinsurance market, offering investors high-yield, security-backed digital securities.
Business Overview and History
Oxbridge Re was incorporated on April 4, 2013 as an exempted company under the laws of the Cayman Islands. The company directly owns 100% of Oxbridge Reinsurance Limited, a licensed reinsurance subsidiary that was granted a Class C Insurer's license in 2013. Oxbridge Reinsurance Limited provides reinsurance solutions primarily to property and casualty insurers in the Gulf Coast region of the United States.
In December 2017, Oxbridge established Oxbridge Re NS, a Cayman domiciled and licensed special purpose insurer, to provide additional collateralized capacity to support Oxbridge Reinsurance Limited's reinsurance business. Oxbridge Re NS issues participating notes to third-party investors, with the proceeds used to collateralize Oxbridge Reinsurance Limited's reinsurance obligations.
In December 2022, Oxbridge formed a new subsidiary called SurancePlus Inc., a British Virgin Islands business company focused on tokenizing reinsurance contracts and offering digital securities. This strategic move marked the company's entry into the rapidly evolving RWA tokenization space, capitalizing on the inherent transparency and accessibility offered by blockchain technology.
The company has faced some challenges over the years. In 2021, Oxbridge reported a net loss of $9.9 million, its largest net loss in the past five years, likely due to the impacts of the COVID-19 pandemic on the insurance and reinsurance industry. However, the company was able to return to profitability in 2022, reporting net income of $1.8 million.
The launch of SurancePlus' first tokenized reinsurance security, the DeltaCat Re Token, in 2023 was a landmark achievement. The DeltaCat Re Token, which represents fractionalized interests in reinsurance contracts underwritten by Oxbridge Re NS, was met with significant investor demand, ultimately exceeding its initial 42% targeted return by paying out an impressive 49.11%.
Building on this success, in 2024, SurancePlus introduced two new tokenized reinsurance offerings, EtaCat Re (20% targeted return) and ZetaCat Re (42% targeted return), providing investors with the flexibility to choose their preferred risk-return profile. These blockchain-powered securities have further solidified Oxbridge Re's position as a pioneer in the RWA tokenization space.
Business Segments
Oxbridge Re operates through two primary business segments: Property and Casualty Reinsurance and Tokenized Reinsurance Securities.
Property and Casualty Reinsurance
This core segment is conducted through Oxbridge Reinsurance Limited and Oxbridge Re NS. It focuses on providing fully collateralized reinsurance contracts, primarily to property and casualty insurers in the Gulf Coast region of the United States, with an emphasis on Florida. Oxbridge specializes in underwriting medium frequency, high severity risks where sufficient data exists to effectively analyze the risk-return profile.
For the nine-month period ended September 30, 2024, this segment generated net premiums earned of $1.71 million, compared to $732,000 in the prior year period, representing a significant increase of over 130%. The increase was due to an expansion of the reinsurance contracts in force during 2024 compared to 2023. The segment did not incur any losses or loss adjustment expenses during the nine-month periods ended September 30, 2024 and 2023. Policy acquisition costs and underwriting expenses for the nine-month period ended September 30, 2024 were $188,000, up from $80,000 in the prior year period, reflecting the growth in reinsurance contracts.
Tokenized Reinsurance Securities
Established in 2023, this segment operates through SurancePlus Inc., developing, offering, and selling tokenized reinsurance securities. These securities represent fractionalized interests in the reinsurance contracts underwritten by Oxbridge Re NS.
For the nine-month period ended September 30, 2024, SurancePlus generated $612,000 in management fee income and $1.52 million in underwriting-related income from its tokenization activities. SurancePlus reported net income of $595,000 for the nine-month period, with $1.38 million of income attributable to the tokenholders.
Financial Performance and Ratios
Financials
Oxbridge Re's financial performance has been mixed in recent years. For the fiscal year ended December 31, 2023, the company reported a net loss of $9.37 million and negative operating cash flow of $1.26 million. However, the company's core reinsurance business has shown improvement, with net premiums earned increasing from $732,000 in the first nine months of 2023 to $1.7 million in the same period of 2024.
For the most recent quarter ended September 30, 2024, Oxbridge Re reported revenue of $205,000, down from $549,000 in Q3 2023. However, net loss improved significantly to $540,000 from a loss of $7.3 million in Q3 2023, primarily due to a decrease in the unrealized loss on other investments.
The company's loss ratio, which measures the profitability of its underwriting activities, has remained at 0% for both 2023 and 2024, reflecting the absence of significant losses during these periods. The acquisition cost ratio increased marginally from 10.9% in the first nine months of 2023 to 11% in the same period of 2024, primarily due to higher premium levels.
Oxbridge Re's expense ratio decreased significantly from 244.3% in the first nine months of 2023 to 98% in the same period of 2024. This improvement was driven by higher premium levels and lower general administrative expenses.
Liquidity
The company's balance sheet remains relatively strong, with cash and cash equivalents of $1.41 million and restricted cash and cash equivalents of $3.41 million as of September 30, 2024. Oxbridge Re's total assets stood at $7.32 million as of September 30, 2024, while total liabilities were $3.67 million, resulting in a debt-to-equity ratio of 0.0238.
Recent Developments and Outlook
In 2024, Oxbridge Re announced a strategic partnership between its SurancePlus subsidiary and Zoniqx, a pioneer in digital asset management. This collaboration is expected to further enhance SurancePlus' tokenization and web3 capabilities, positioning the company for continued growth in the RWA market.
Moreover, Oxbridge Re has initiated a strategic review process, forming a special committee of the Board to consider a full range of strategic alternatives for the company and its web3 division. This may include a sale, spin-off, merger, divestiture, recapitalization, or the company may continue to operate as a public independent entity.
Industry analysts remain optimistic about the growth potential of the tokenized RWA market, with estimates suggesting it could reach $16 trillion by 2030. Oxbridge Re, with its innovative approach and first-mover advantage in the reinsurance tokenization space, is well-positioned to capitalize on this emerging trend.
The global reinsurance market is expected to grow at a CAGR of around 4-5% over the next 5 years, driven by increased demand for reinsurance coverage, particularly in emerging markets. This trend bodes well for Oxbridge Re's core reinsurance business.
Looking forward, Oxbridge Re plans to issue two tranches of tokenized securities: a high-yield offering targeting an approximate 42% return and a balanced yield offering targeting an approximate 22% return. These offerings build on the success of the DeltaCat Re Token, which surpassed its initial 42% target by paying out a 49.11% return.
Risks and Challenges
Oxbridge Re's foray into the RWA tokenization market exposes the company to various risks, including regulatory uncertainty, technology-related challenges, and competition from other players in the space. The company's reliance on a limited number of large customers for its reinsurance business also poses a concentration risk.
Moreover, the company's significant investment in Jet.AI, which is measured at fair value, could result in income statement volatility and impact Oxbridge Re's financial performance going forward.
Conclusion
Oxbridge Re's transformation into a pioneering RWA tokenization platform, coupled with its stable reinsurance business, positions the company for potentially significant growth in the years ahead. The successful launch of its tokenized reinsurance offerings and strategic partnerships have laid the groundwork for the company to capitalize on the rapidly expanding tokenized asset market. However, Oxbridge Re must navigate the inherent risks and challenges associated with this emerging industry to fully realize its long-term potential.
The company's focus on diversifying into the RWA tokenization space through SurancePlus represents a new and rapidly growing opportunity. With the global reinsurance market poised for steady growth and the tokenized asset market showing tremendous potential, Oxbridge Re is strategically positioned at the intersection of traditional reinsurance and innovative blockchain-based financial products. As the company continues to evolve and adapt to market demands, investors and industry observers will be closely watching its progress in both its core reinsurance business and its pioneering tokenization efforts.