Smart Contract Insurance: The Underwriter Model in 2024
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Smart contract insurance covers under $500M in DeFi, less than 1% of TVL. Review the underwriter model, risk pricing, and the capital allocation case.
Frequently Asked Questions
- Smart contract insurance is on-chain cover that pays a policyholder if a specific protocol's code is exploited and funds are lost. Capital providers stake tokens to back the cover and earn a share of premiums, and claims are approved either by member vote or by automated on-chain triggers depending on the protocol.
- Traditional cyber insurers price risk using decades of loss history, reinsurance markets, and regulated capital reserves. Smart contract cover protocols price risk with staked-capital signals from anonymous risk assessors, live claims data from a handful of years, and no reinsurance backstop, which keeps coverage capacity thin relative to total value locked.
- Capital allocators evaluating DeFi exposure, protocol treasuries seeking counterparty protection, and institutional desks running due diligence on decentralized finance infrastructure before committing capital are the primary audience for smart contract insurance products.
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Tags:
smart contract insurance
DeFi risk
underwriting
capital allocation
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