DeFi Insurance Claims Reach $34.4 Million

blockchain.news:

The decentralized finance (DeFi) industry has seen remarkable growth in recent years, with more than $160 billion in total value locked in various protocols and applications as of March 2023. However, this rapid growth also brings increased risks, such as smart contract bugs, hacks, and market volatility. To mitigate these risks, several DeFi insurance companies have emerged in the past few years, offering coverage for various types of losses and damages.

According to a recent report by OpenCover, a DeFi analytics firm, DeFi insurance companies paid out $34.4 million in claims in 2022, a significant increase from previous years. In comparison, only $36.9 million of such claims have been paid out since OpenCover began tracking the data. The report noted that notable payouts included $22.5 million during the collapse of the Terra Luna ecosystem in May 2022 and $4.7 million from the collapse of crypto exchange FTX in November 2022.

DeFi insurance coverage has expanded to eight major categories, including protocol loss coverage, stablecoin depeg coverage, yield token coverage, custodial account coverage, audit (smart contract bug) coverage, slashing coverage for professional validators, and other customized coverage. The report also highlighted that in the past nine months, the mean daily leverage ratio of active policy amount to underwriting capital was 1.07 times across different providers.

However, despite the growth of the DeFi insurance industry, the report also pointed out that more needs to be done regarding the ability to scale. «Ultimately, scaling these innovations to a meaningful size will depend on the robustness of DeFi risk assessment frameworks — of which there are currently very few,» the report