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DeFi insurance payouts amounted to $34.4M in 2022: Report

Ninety percent of all DeFi insurance claims paid out since inception were distributed in 2022, according to OpenCover.

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According to a March 21 report published by decentralized finance analytics firm OpenCover, DeFi insurance companies paid out $34.4 million in claims in 2022. In context, only $36.9 million of such claims have been paid out since OpenCover began tracking the data. Notable payouts include $22.5 million during the collapse of the Terra ecosystem in May 2022 and $4.7 million from the collapse of crypto exchange FTX in November 2022. 

Despite the surge in payouts, OpenCover said only $231 million worth of funds in DeFi protocols had been insured as per its data, representing just 0.5% of the total value locked in the DeFi industry. Cointelegraph reported on Jan. 5 that DeFi security exploits rose by 47.4% year-over-year in 2022 to $3.64 billion. Global blockchain-related crimes, excluding financial crimes, amounted to $13.7 billion during the year, wrote Chinese blockchain security firm LianAn Technology. 

DeFi insurance has expanded to eight major categories: 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. OpenCover said 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:

Despite DeFi insurance industry growth, OpenCover says 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.