RFC: Fern Re Formation + Re investment redeployment

Hugh · August 4, 2026, 4:02pm

Fern Re Formation, Capital Commitment & Governance Approval

Category: Critical Decision / Use of Funds

Summary

Following on from NMPIP-262 (Bridging Capital to Traditional Markets), DAO members and the Foundation team have made significant progress toward establishing a regulated reinsurance entity aligned with the Nexus Mutual protocol. An application for a B(iii) Reinsurance Licence in the Cayman Islands has now been submitted for Fern Re.

This proposal asks members to formally approve:

The ownership, capitalization, and leadership structure of Fern Re (Cayman based entity).
The ownership, capitalization, and leadership structure of Fern Speciality Ltd (UK based entity).
The redemption of the DAO’s existing investment in Re (made ahead of the launch of Re’s reUSDe token) and its reallocation, partly back into reUSDe and partly toward the Fern Re capital commitment.

Together, these actions bring the wider Nexus Mutual ecosystem a step closer to establishing a fully licensed reinsurance vehicle owned by the DAO and its legal wrapper, while continuing to deepen the relationship with Re through initiatives including the Real-World Insurance Vault.

Background

NMPIP-262 gave the Advisory Board a mandate to pursue regulatory approval for building regulated insurance cells on top of the Mutual, with the intention of diversifying the DAO’s risk exposure and unlocking additional sustainable sources of return, while preserving the Mutual’s primary function as an onchain discretionary mutual.

Since then, the project team has:

Established the most appropriate jurisdiction and structure. Being a Cayman Islands reinsurance entity, Fern Re, sponsored by Terrapin International Foundation (the Panamanian foundation that wraps Nexus Mutual DAO).
Submitted a formal application to the Cayman Islands Monetary Authority (CIMA) for a B(iii) Reinsurance Licence.
Worked through the initial capital structure, governance, and staffing required to operate Fern Re as a standalone regulated entity in its first phase, ahead of deeper onchain integration.
Set up Fern Specialty Limited, a UK service company intended to provide operational services to Fern Re.

Separately, the DAO holds an existing investment with Re, made prior to the launch of Re’s reUSDe token. That investment is coming to the end of its intended lifecycle and has performed well, and the project team believes now is the right time to redeem it and redeploy some of the proceeds.

Part 1 — Fern Re and Fern Specialty: Ownership, Capital & Governance

This is intended as the simplest structure to get Fern Re operational and licensed. The Foundation expects to more fully integrate Fern Re with the onchain protocol over time, and will bring further proposals to members as that integration is scoped in detail.

1.1 Ownership & Initial Capital

Terrapin (on behalf of the Nexus Mutual DAO) to be the 100% equity owner of Fern Re.
Terrapin to supply $2,500,000 of initial equity capital to Fern Re, from the Capital Pool, intended primarily to satisfy minimum regulatory capital requirements and to facilitate the writing of initial insurance policies.
Terrapin (on behalf of the Nexus Mutual DAO) to be the 100% equity owner of Fern Specialty Ltd.
Terrapin to supply $1,000,000 of initial equity capital to Fern Specialty, from the Community Fund, intended to primarily fund initial operational expenses to support Fern Re and other for-profit service activities.
Both investments should be expected to be illiquid. While there is the potential for relatively early dividends due to the short tail nature of the initial business lines, its very likely the best use of profits will be to fuel further growth.

1.2 Surplus Note Investment

Approval to invest up to $5,000,000 of the Mutual’s existing capital pool into Fern Re via a surplus note as Fern Re requires.
The drawing of this note is dependent on the speed of sales growth in Fern Re.
The surplus note accrues at a rate of 12% per annum when drawn.
Loss priority: the equity layer (Terrapin’s $2.5m) bears first loss ahead of the surplus note. The surplus note is subordinated to policyholder claims but senior to equity.

Members should be aware that, should claims experience be poor, further capital injections beyond the amounts approved here may be required to keep Fern Re appropriately capitalized. Any such additional injection would be brought back to members for approval at the time.

As all investments (both equity investments and the surplus note) will be held by Terrapin, all profits from these activities will accrue to DAO members and therefore NXM holders.

1.3 Governance & Leadership

Fern Re

Hugh Karp to serve as a Director and Chairman of Fern Re.
Jack Prenter to be appointed Director of Fern Re. Jack has driven this project from the outset and has been part of the Nexus Mutual team for over four years.
A third, independent director is to be appointed. This individual has not yet been identified; the team will bring a nomination to the Advisory Board, (per delegated authority) once identified.
Ania Szpak currently serves as Chief Legal Officer within the Nexus Mutual structure and will oversee the legal function of both Nexus Mutual and Fern Re structure. This shared appointment reflects the close operational and governance links between the entities and will be subject to appropriate conflict of interest, confidentiality and professional independence arrangements.

Fern Specialty Ltd

Jack Prenter to be appointed CEO and Director of Fern Specialty.
Hugh Karp to serve as a Director and Chairman of Fern Specialty.
Adam Wickens to serve as a Director of Fern Specialty. Adam joined the Nexus Mutual team recently from Relm where he has led underwriting for digital asset risks and is well known among brokers and the wider insurance community.
Ania Szpak currently serves as Chief Legal Officer within the Nexus Mutual structure and will oversee the legal function of both Nexus Mutual and Fern Re structure. This shared appointment reflects the close operational and governance links between the entities and will be subject to appropriate conflict of interest, confidentiality and professional independence arrangements.

1.4 Path to Tighter Onchain Integration

This structure, a Cayman-incorporated, DAO-owned entity capitalized with equity and a surplus note, is deliberately the most straightforward way to get a licensed reinsurance vehicle operating. It is not intended as the end state. The DAO R&D and Foundation Engineering teams have launched a project to revamp the staking mechanism, which will allow the Mutual to more tightly integrate Fern Re with the onchain protocol, and will bring detailed proposals to members as that work matures.

1.5 Risks & Considerations for Members

Concentration/counterparty risk: $2.5m initially, and up to $7.5m, of capital pool funds (equity + surplus note) will sit inside a single regulated entity rather than the onchain Capital Pool. Similar to the existing Re investment.
Regulatory risk: the B(iii) licence application is submitted but not yet granted; timing and conditions of approval are outside the DAO’s control.
Capital call risk: poor claims experience could require further capital beyond what’s approved here.
Key person risk: leadership is concentrated in a small initial team (Jack Prenter, Hugh Karp for both Fern Re and Fern Specialty and Adam Wickens for Fern Specialty) pending appointment of the independent director and broader team build-out.
Return profile: the 12% surplus note coupon reflects the subordinated, first-loss-adjacent position of this capital relative to policyholder obligations. Equity returns are expected to be very good on successful business growth but are illiquid and will take time to realise.

Part 2 — Re Investment: Redemption & Reallocation

The Mutual’s existing investment with Re was made prior to the launch of Re’s reUSDe token and is now approaching the end of its intended lifecycle. The investment has performed well, growing from $12m to approximately $14.2m, a return of over $2m.

Proposal

Withdraw the full existing Re investment (~$14.2m).
Reallocate $9m back into reUSDe, maintaining the Mutual’s exposure to Re’s yield-bearing product in its current, tokenized form.
Direct the remainder (~$5.2m) toward the Fern Re capital commitment described in Part 1, subject to the $5m surplus note cap approved above, and source the remaining required funds from USDC in the capital pool.

The Mutual continues to work closely with Re on other initiatives, including the Real-World Insurance Vault, and members should expect further updates and proposals related to this relationship over the coming months.

What Members Are Being Asked to Approve

The Members are being asked in addition to the authority previously granted under Governance Votes 262, to confirm, approve and authorise the following:

Governance Vote A (#TBD)

Redemption of the existing Re investment (~US$14.2 million).
Allocation of US$9 million into reUSDe.

Governance Vote B (#TBD)

Terrapin to invest US$2.5 million from the Capital Pool as initial equity capital for Fern Re, becoming 100% shareholder.
Terrapin to invest US$1million from the Community Fund as initial equity capital for Fern Specialty Ltd, becoming the 100% shareholder.
Terrapin to invest up to US$5 million of Capital Pool assets into Fern Re via a 12% surplus note, subordinated to policyholder claims, with equity bearing first loss.
Acknowledgement that further capital injections may be required in the future if claims experience requires it (to be separately approved at that time).
The appointment of Jack Prenter as Director and CEO of Fern Re.
The appointment of Hugh Karp as Director and Chairman of Fern Re.
Approve the provision of Chief Legal Officer services to Fern Re by Ania Szpak under the applicable services arrangement.
The Advisory Board will be authorised to:

identify and appoint a third, independent director, of Fern Re to be confirmed with members once identified;
represent Terrapin and the wider DAO’s interests as shareholder of Fern Re and Fern Specialty Ltd;
appoint, remove and replace directors, subject to applicable regulatory requirements and any specific member-confirmation requirement;
exercise Terrapin’s ordinary shareholder rights; and
approve financing and other financial matters of up to US$1 million, provided they do not change the cap table, dilute Terrapin’s ownership or otherwise fall within a matter reserved for members.

The authority for the Advisory Board (Foundation Council) and the directors to complete the licensing and establishment process, appoint advisers and service providers, execute the necessary documents and make any non-material changes required by CIMA or professional advisers
Authorise Fern Re and Fern Specialty Ltd to enter into necessary third party agreements, including but not limited to technology, intellectual property, personnel, and administrative services.
Authorisation for Hugh Karp, as a member of the Advisory Board, to act as Terrapin’s principle representative in relation to Fern Re and Fern Specialty Ltd, including representing the Members interests, and decision making on a day to day basis including non-material changes to the structure, or documents (including where required by the regulators, legal counsel, auditors, insurance managers, or other professional advisers).
The respective boards of Fern Re and Fern Specialty Ltd will be responsible for:

the day to day management and operation of the relevant company;
regulatory compliance, risk management and the prudent operation of the relevant business; and
determining and implementing changes to the relevant licence or expansion into additional business lines, subject to applicable regulatory approval and provided the change does not trigger a matter reserved for members.

Ratify actions already taken under the previous mandate (vote Nexus Mutual) including engaging advisers, preparing the business plan, identifying the structure, discussing the same with the regulators and incurring the costs associated with this process.
Board Independence: neither the Advisory Board nor the Members may direct the Fern Re board of directors to act inconsistently with the director’s duties or regulatory obligations.
Matters reserved for the Members and requiring separate vote:

any additional fundraising or capital commitment;
any issue, transfer or cancellation of shares, change to the cap table or other transaction resulting in shareholder dilution;
the creation of a new surplus note structure or any material amendment to the principal, interest, subordination, repayment or conversion terms of an existing surplus note; and
the acquisition, disposal or transfer of any material shareholding interest in Fern Re or Fern Specialty Ltd.

Next Steps

This proposal will be open for member discussion on the governance forum before moving to Snapshot votes as per the optimistic governance process.
Updates on the CIMA licence application, Fern Re’s operational build-out, and the broader Re relationship (including the Real-World Insurance Vault) will be shared with members as they develop.
As of the time of writing CIMA have given the go-ahead to incorporate the Cayman entity, with formal license approval still pending.

Members are encouraged to ask questions and share feedback below before this proposal proceeds to a vote.