Curriculum·J312 Insurance, Hedging, and On-Chain Risk Transfer·about 32 min
Cover protocols
By the end of this lesson you can
- →Describe how an on-chain cover protocol funds, prices and settles a claim
- →Identify who decides a claim and whether the process can change while an event is running
- →Compute a pool's capacity against its outstanding cover, and what correlation does to it
- →Evaluate any cover product with the three questions that are answerable before you buy
Junior · enrolled learners
This lesson opens with InsurAce and the UST claims window, May 2022.
- What happened
- InsurAce offered de-peg cover on UST alongside cover on Anchor and Mirror. When Terra collapsed in May 2022 the protocol announced on 13 May that it was shortening the claims window for those products, reducing the reporting period from 15 days to 7 days, a change affecting 234 Terra portfolio covers. It estimated roughly $11.7M of UST de-peg claims. In August 2022 it announced payouts of about $12M to 155 claimants. Commentary at the time split on the change, with one reading that a shorter window was needed to establish the claim set quickly and prevent the position growing during a live event, and another that the terms governing a claim were altered after the insured event had begun.
- The decision point
- The product paid, at scale, on the largest correlated event in the sector's history, which is the strongest evidence available that on-chain cover can work. And the rule governing when a claim had to be reported was changed while the event was running. Both are true, and the second is the question a buyer can ask before purchasing anything: who is permitted to change the process, and when.
- Recorded loss
- $12,000,000
What you will be able to answer
- →How does a cover protocol fund itself?
- →What is the capacity question?
- →Who decides a claim?
- →What are the three questions?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://cointelegraph.com/news/insurace-says-it-will-pay-millions-to-claimants-after-terra-s-collapse
- https://www.benzinga.com/markets/cryptocurrency/22/08/28600860/insurace-announces-12-million-insurance-payouts-to-155-victims-of-terra-ust-crash
- https://docs.nexusmutual.io/overview/claims-history/ftx/
- https://opencover.com/nexus-mutual-cover-covered-risks-and-exclusions/
Confidence medium·Volatility high·Reviewed 2026-08-06·Owner unassigned
Contested
Whether shortening the claims window mid-event was appropriate is genuinely contested and this lesson does not resolve it. A shorter window limits a growing correlated exposure and protects the remaining pool, and it also changes a term after the insured event has begun. Per P6 the useful output is the question a buyer should ask beforehand rather than a verdict.
Reported InsurAce figures vary between an estimate of about $11.7M of UST de-peg claims and an announced payout of about $12M to 155 claimants, across different dates and product sets. The capital pool figure of roughly $203M in part two is derived from the published statement that FTX cover was 4.33 percent of the pool, not quoted directly, and is stated as derived.
Product names, pool sizes, pricing and wordings in this area change frequently and are marked high volatility for that reason. The mechanism and the three questions are durable. The figures are not, and should be re-derived before use.