Members Capital's Fox: Digital treasuries seek ‘boring’ reinsurance yields

Digital asset treasuries are showing strong interest in reinsurance via ILS structures, attracted by the sector's “boring, dull, robust, dependable” returns, Members Capital Management founder and CEO Ben Fox told The Insurer TV.

Members Capital, an independent ILS manager launched in Bermuda earlier this year, aims to convert digital assets into reinsurance capital. Fox said crypto-native firms, such as exchanges with large token holdings, are looking to invest for the same reasons pension funds and sovereign wealth funds have long backed the asset class, namely its stable, uncorrelated returns.

“Large fiat treasuries and endowments are invested in the reinsurance market because of the diversification benefits … This is exactly the same, except it’s providing diversification against bitcoin, stablecoins and altcoins,” Fox said in an interview last week.

Members Capital currently only accepts USDC, a dollar-backed stablecoin issued by Circle, into its fund, which allows it to avoid the volatility associated with other crypto assets.

Fox said cedants would not be taking on crypto risk directly, as Members Capital has Hannover Re as a fronting partner.

“We have a relationship with Hannover Re as our front, so from a cedant’s perspective ... they’re facing the creditworthiness of Hannover Re,” Fox said.

Members Capital, which launched its first fund on July 1, is now focused on scaling assets under management to become a meaningful player in the market, Fox added.