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Decentralized finance (DeFi) has been rapidly growing in the past years, and with it, DeFi insurance.
A report published by OpenCover on March 21 revealed that 90% of all DeFi insurance claims paid out since inception were distributed in 2022, totaling $34.4 million. However, the data also revealed that only 0.5% of the total value locked in the DeFi industry, or $231 million, was insured.
Interestingly, the report also report showed that the payouts were concentrated in only a few notable incidents, including the collapse of the Terra Luna ecosystem and the collapse of crypto exchange FTX, which accounted for $22.5 million and $4.7 million, respectively.
Despite the significant growth in payouts, OpenCover believes 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 firm wrote.”
However, it is worth noting that DeFi insurance has expanded to eight major categories — protocol loss coverage, stablecoin depeg coverage, and slashing coverage for professional validators. OpenCover found that the mean daily leverage ratio of active policy amount to underwriting capital was 1.07 times across different providers in the past nine months.
Overall, the data shows that DeFi insurance is crucial in protecting investors’ funds and the industry as a whole. As the DeFi industry continues to grow, it is essential for insurance providers to continue innovating and expanding their coverage to ensure that investors can participate in the ecosystem with confidence.