DeFi Protocols Lose Out as Less Than 1% of Assets Covered by Insurance Policies

1: defi protocols have locked in $47 billion worth of assets, however less than 1% of these assets are covered by a policy to replace them in the event of a hack or code error. since june, 17,000 covers have been sold, with 525 claims being submitted and 68% of them resulting in a payout.
paragraph 2: sherlock protocol specializes in offering cover exclusively to smart contracts, however the bankruptcy of orthogonal trading left it exposed to the long tail contagion of the ftx bankruptcy. on november 11, sherlock experienced a $4 million loss and was unable to access its usdc due to a mandatory 90-day lockup period. insurace has become a leader in the defi cover provider space, with $12 million in total value locked in coverage for 150 protocols across 20 different chains. insurace is now looking to set up operations in bermuda in order to provide coverage to bigger clients.
paragraph 3: the highly regulated nature of the insurance industry in the us has been a headwind for the defi cover industry, with traditional insurance players being slow to understand the defi industry. opencover founder smith sees the defi space as a huge opportunity, as it solves a lot of risks but also creates new ones that must be natively solved. growing web3 risk has brought with it publicly available data that helps defi cover and insurance providers better understand those risks. sherlock has implemented audit contests for smart contracts, as well as covered five more protocols and launched an audit contest for optimism on january 20.

By Evey Lovelace

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