DeFi insurance companies will pay out $34.4 million in claims in 2022, according to a March 21 report from decentralized finance analytics firm OpenCover. For context, only $36.9 million in such claims have been paid out since OpenCover started tracking the data. Notable payouts include $22.5 million during the May 2022 collapse of the Terra ecosystem and $4.7 million during the November 2022 collapse of cryptocurrency exchange FTX.
Despite the surge in spending, OpenCover said only $231 million worth of funds in DeFi protocols were insured, according to its data, accounting for just 0.5% of the total value locked in the DeFi industry. Cointelegraph reported on Jan. 5 that DeFi security exploits will grow by 47.4% year-over-year to $3.64 billion in 2022. Global blockchain-related crimes (excluding financial crimes) hit $13.7 billion this year, Chinese blockchain security firm LianAn wrote.
DeFi insurance has expanded to eight main categories: protocol loss insurance, stablecoin depeg insurance, yield token insurance, custody account insurance, audit (smart contract bug) insurance, professional validator slash insurance, and other custom insurance. According to OpenCover, the average daily leverage of active policy amounts to written capital across providers was 1.07 times over the past nine months: "At the time of writing, the total value of the underwritten pool tracked by OpenCover is $286M (186,000 ETH), with a low of $210M and a high of $394M over the past 9 months. Current value is lower than the period maximum in USD 26%.” While the DeFi insurance industry is growing, OpenCover says more needs to be done in terms of scaling capabilities. “Ultimately, scaling these innovations to meaningful scale will depend on the robustness of DeFi risk assessment frameworks of which there are currently few,” the firm wrote.
