According to a recent report by OpenCover, a data analytics firm, 90% of the value of DeFi insurance claims have been paid out in 2022 due to the increasing risks in the industry. The report stated that DeFi insurance companies paid out compensation totaling $34.4 million to customers in 2022, equivalent to 90% of the total insured value.

Some notable claims were related to major events such as the Depeg UST, where $22.5 million was paid out, and the FTX collapse, where $4.7 million was paid out. The data from providers showed that a total of 19,839 insurance contracts were sold, with 552 claims and 379 payments. The number of contracts sold since November 6, 2022, has increased by 85% compared to four months prior when the news of FTX’s instability broke out.

In addition, the demand for insurance has been fueled by speculation in Layer-2 airdrops, such as Arbitrum. Following the announcement of the airdrop, the rate of insurance purchases increased significantly by 15%.

The primary buyers of DeFi insurance are DAO organizations, project development teams, hedge funds, and high-net-worth individuals. There is very little demand from small-scale investors.

Currently, the total liquidity that DeFi insurance providers have committed to guaranteeing their customers amounts to 186,000 ETH (approximately $286 million). However, despite the general increase in demand for DeFi insurance, this capital only supports insurance for operations valued at 151,000 ETH (approximately $231 million), equivalent to about 0.5% of the total locked-up value of $48 billion in DeFi.

OpenCover’s report collected data over the past nine months from seven EVM-compatible blockchains. The list of insurance providers mentioned includes Nexus Mutual, Unslashed Finance, InsurAce, Chainproof, Sherlock, Neptune Mutual, Risk Harbor, InsureDAO, and Ease. Among them, Nexus Mutual dominates the market, accounting for 80% of the total market capitalization.

It is clear that the market is paying more attention to the cryptocurrency insurance industry. However, this segment still faces limitations such as scalability, high costs, trust in insurance companies, or different regulations compared to traditional insurance. Solving these issues on a large scale could be the key to sparking and developing the application of DeFi for the public.

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This article was republished from azcoinnews.com

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