Recently, wildfires in California have caused huge economic losses to local residents and businesses. Faced with this severe situation, many insurance companies have adopted conservative strategies, including raising premiums, restricting the issuance of new policies, and canceling existing policies.

For example, large insurance companies such as State Farm have canceled thousands of home insurance contracts in high-risk areas and refused to renew some policies, resulting in a large number of homeowners losing necessary protection. At the same time, due to the state government's control policy on insurance premiums, some insurance companies believe that it is unprofitable to continue to operate fire insurance business and even choose to withdraw from the market completely.

This not only affects the recovery and reconstruction of the affected people, but also exposes the limitations of the traditional insurance model in dealing with extreme natural disasters.

Adjust pricing strategies: In order to reflect the rising risk level, insurance companies have raised premium prices, making it unaffordable for many families. Although doing so can alleviate financial pressure to a certain extent, it may also lead to customer loss, especially for those with poorer economic conditions.

Shrinking service scope: In addition to directly withdrawing from high-risk areas, some companies have also reduced the supply of specific types of insurance products, such as agricultural insurance or commercial property insurance. Although this practice protects its own interests, it ignores the overall security needs and development potential of the community.

Relying on reinsurance to transfer risks: It is common to spread risks by purchasing reinsurance, but in the face of large-scale disasters, the capacity of the reinsurance market is limited and the cost is high, so it is not a long-term solution.

Strengthening risk management measures: Some insurance companies have begun to invest in advanced predictive models and technologies to better assess and manage risks. However, the effectiveness and popularity of these tools remain to be verified.

If the concept of RWA (real world assets) is introduced and applied to the insurance industry, especially in the context of the California wildfires, it may bring significant changes in the following aspects:

Improve data transparency and real-time:

Blockchain technology and Internet of Things (IoT) devices can realize real-time monitoring and recording of the status of insured assets.

For example, in the agricultural field, farmers can obtain information such as soil moisture and temperature through sensors installed in the fields, and upload this data to the blockchain platform.

Once a disaster occurs, insurance companies can immediately access accurate historical data, quickly verify the loss, speed up the claims process, and reduce disputes.

Optimize risk assessment mechanism:

RWA allows the creation of a more sophisticated risk scoring system, combining geographic information systems (GIS), historical meteorological data and other relevant factors to generate personalized risk profiles.

For properties in high-risk areas, insurance companies can formulate differentiated premium plans based on specific locations, building materials and other factors, rather than rejecting insurance or raising prices across the board.

Enhance liquidity support:

For illiquid assets (such as commercial real estate) that are difficult to cash out or lack a secondary market, converting them into RWA and issuing them in tokenized form can greatly improve their trading flexibility and market depth.

This means that holders can quickly sell part of their shares when they need funds without having to dispose of the entire asset as a whole.

This is particularly important for post-disaster reconstruction because it can help disaster victims get the funds they need faster.

Promote inclusive financial development:

Small businesses and individuals often find it difficult to obtain support from traditional financial institutions due to their small size or insufficient credit history.

RWA can establish a trust mechanism through digitized physical assets, making it easier for them to obtain loans or insurance services. For example, farmers can use their cultivated land as collateral to obtain small loans or purchase crop insurance, thereby better resisting the economic losses caused by natural disasters.

Promoting cooperation and innovation:

The application of RWA encourages cross-sector collaboration, such as cooperation between insurance companies, agricultural technology companies, local governments and social organizations.

All parties can jointly develop new products and services, such as automatic claims settlement systems based on smart contracts, short-term liability insurance for temporarily rented items, etc. Such innovations can not only improve efficiency, but also meet more diverse market needs.

Strengthening regulatory compliance:

Government agencies and industry self-regulatory organizations are increasingly paying attention to how to ensure the security and legality of fintech products.

By incorporating RWA into the blockchain ecosystem, every transaction is fully recorded for easy audit tracking. In addition, smart contracts can also pre-set rules and conditions, and once they are met, the corresponding operations will be executed immediately, which not only ensures the transparency and fairness of business processes, but also reduces the burden of manual review.

Improving cross-border collaboration efficiency:

In the international reinsurance market, participants can use RWA documents in standardized formats to quickly complete contract signing and subsequent settlement work, greatly shortening the cycle and reducing costs.

This helps to allocate resources globally, especially in cross-border rescue and support.

In the face of disasters, time is life, and every moment of delay may mean more irreparable losses.

Although the current response of the insurance industry is based on risk control considerations, it exposes its lack of flexibility and adaptability. The introduction of RWA (real world asset) technology is not only a technological advancement, but also a reshaping of the entire insurance ecosystem. It provides solutions such as real-time data monitoring, accurate risk assessment, and enhanced liquidity support, making insurance services more intelligent, convenient and inclusive.

However, this change is not achieved overnight. It requires the joint efforts of all parties to overcome challenges such as technical compatibility, user education, and the improvement of the legal framework.

As the frequency of disasters caused by climate change increases, we can no longer wait for the next disaster to sound the alarm. Now is the time to act. With the help of RWA, the insurance industry must transform quickly and prepare for any crisis that may occur in the future.

Only in this way can we ensure that every family and business is no longer isolated and helpless in the face of disasters, but has a solid umbrella of protection.

Recently, wildfires in California have caused huge economic losses to local residents and businesses. Faced with this severe situation, many insurance companies have adopted conservative strategies, including raising premiums, restricting the issuance of new policies, and canceling existing policies.

For example, large insurance companies such as State Farm have canceled thousands of home insurance contracts in high-risk areas and refused to renew some policies, resulting in a large number of homeowners losing necessary protection. At the same time, due to the state government's control policy on insurance premiums, some insurance companies believe that it is unprofitable to continue to operate fire insurance business and even choose to withdraw from the market completely.

This not only affects the recovery and reconstruction of the affected people, but also exposes the limitations of the traditional insurance model in dealing with extreme natural disasters.

Adjust pricing strategies: In order to reflect the rising risk level, insurance companies have raised premium prices, making it unaffordable for many families. Although doing so can alleviate financial pressure to a certain extent, it may also lead to customer loss, especially for those with poorer economic conditions.

Shrinking service scope: In addition to directly withdrawing from high-risk areas, some companies have also reduced the supply of specific types of insurance products, such as agricultural insurance or commercial property insurance. Although this practice protects its own interests, it ignores the overall security needs and development potential of the community.

Relying on reinsurance to transfer risks: It is common to spread risks by purchasing reinsurance, but in the face of large-scale disasters, the capacity of the reinsurance market is limited and the cost is high, so it is not a long-term solution.

Strengthening risk management measures: Some insurance companies have begun to invest in advanced predictive models and technologies to better assess and manage risks. However, the effectiveness and popularity of these tools remain to be verified.

If the concept of RWA (real world assets) is introduced and applied to the insurance industry, especially in the context of the California wildfires, it may bring significant changes in the following aspects:

Improve data transparency and real-time:

Blockchain technology and Internet of Things (IoT) devices can realize real-time monitoring and recording of the status of insured assets.

For example, in the agricultural field, farmers can obtain information such as soil moisture and temperature through sensors installed in the fields, and upload this data to the blockchain platform.

Once a disaster occurs, insurance companies can immediately access accurate historical data, quickly verify the loss, speed up the claims process, and reduce disputes.

Optimize risk assessment mechanism:

RWA allows the creation of a more sophisticated risk scoring system, combining geographic information systems (GIS), historical meteorological data and other relevant factors to generate personalized risk profiles.

For properties in high-risk areas, insurance companies can formulate differentiated premium plans based on specific locations, building materials and other factors, rather than rejecting insurance or raising prices across the board.

Enhance liquidity support:

For illiquid assets (such as commercial real estate) that are difficult to cash out or lack a secondary market, converting them into RWA and issuing them in tokenized form can greatly improve their trading flexibility and market depth.

This means that holders can quickly sell part of their shares when they need funds without having to dispose of the entire asset as a whole.

This is particularly important for post-disaster reconstruction because it can help disaster victims get the funds they need faster.

Promote inclusive financial development:

Small businesses and individuals often find it difficult to obtain support from traditional financial institutions due to their small size or insufficient credit history.

RWA can establish a trust mechanism through digitized physical assets, making it easier for them to obtain loans or insurance services. For example, farmers can use their cultivated land as collateral to obtain small loans or purchase crop insurance, thereby better resisting the economic losses caused by natural disasters.

Promoting cooperation and innovation:

The application of RWA encourages cross-sector collaboration, such as cooperation between insurance companies, agricultural technology companies, local governments and social organizations.

All parties can jointly develop new products and services, such as automatic claims settlement systems based on smart contracts, short-term liability insurance for temporarily rented items, etc. Such innovations can not only improve efficiency, but also meet more diverse market needs.

Strengthening regulatory compliance:

Government agencies and industry self-regulatory organizations are increasingly paying attention to how to ensure the security and legality of fintech products.

By incorporating RWA into the blockchain ecosystem, every transaction is fully recorded for easy audit tracking. In addition, smart contracts can also pre-set rules and conditions, and once they are met, the corresponding operations will be executed immediately, which not only ensures the transparency and fairness of business processes, but also reduces the burden of manual review.

Improving cross-border collaboration efficiency:

In the international reinsurance market, participants can use RWA documents in standardized formats to quickly complete contract signing and subsequent settlement work, greatly shortening the cycle and reducing costs.

This helps to allocate resources globally, especially in cross-border rescue and support.

In the face of disasters, time is life, and every moment of delay may mean more irreparable losses.

Although the current response of the insurance industry is based on risk control considerations, it exposes its lack of flexibility and adaptability. The introduction of RWA (real world asset) technology is not only a technological advancement, but also a reshaping of the entire insurance ecosystem. It provides solutions such as real-time data monitoring, accurate risk assessment, and enhanced liquidity support, making insurance services more intelligent, convenient and inclusive.

However, this change is not achieved overnight. It requires the joint efforts of all parties to overcome challenges such as technical compatibility, user education, and the improvement of the legal framework.

As the frequency of disasters caused by climate change increases, we can no longer wait for the next disaster to sound the alarm. Now is the time to act. With the help of RWA, the insurance industry must transform quickly and prepare for any crisis that may occur in the future.

Only in this way can we ensure that every family and business is no longer isolated and helpless in the face of disasters, but has a solid umbrella of protection.