DeFi insurance in the aftermath of the UST de-peg

In the past 24 hours the total amount of UST deposited in Anchor fell by 5 billion. Yesterday 13.9 billion UST were deposited in Anchor today it’s sitting at 8.8 billion UST. The outflow was caused by the UST de-peg which fell to $0.60 for a short period of time. UST has been trading under $1 for 2 days but the dip was most significant in the last 24 hours.

I’m not here to point fingers, it doesn’t matter who was right or wrong. Let’s explore what’s next.

Many DeFi users knew that UST was risky and purchased insurance from DeFi protocols offering protocol or token de-peg insurance. Here’s the summary of what you can expect if you are one of them:

**Nexus Mutual**

Anchor insurance covers only protocol risk (smart contracts), oracle risk or unsound economic design. The last one is a bit vague, but I don’t think that the UST<->Luna economic design can be counted as an Anchor issue. Anchor insurance is sold out.

**InsurAce**

InsurAce offers Anchor insurance but also UST de-peg insurance and a couple of different UST+Protocol packages. What’s important is that InsurAce requires that the 10 day TWAP (time weighted average price) must be under 0.88. In other words UST must stay under 0.88 for at least 10 more days (or fall significantly below that for a shorter period of time). Currently you cannot file a valid claim, let’s see what the next 10 days bring. All UST insurance packages are sold out.

**inSure DeFi**

This protocol follow a more general model – you buy their token and get coverage on all protocols & tokens that fall under their terms. You can get insured against scams, stolen crypto and devaluation.

The last category is most significant in this case. To file a valid claim a token that you hold must have fallen in value by more than 98%, so if you hold UST it must fall to 0.02 or you cannot file a valid claim. inSure DeFi doesn’t track a TWAP value you just have to provide a proof of loss.

**Unslashed Finance**

Similar to InsurAce they offer Anchor insurance as well as UST insurance. They’re a lot more expensive than InsuRace (3x) and they have a little worse terms. They require a 14 day TWAP under 0.87. All UST coverage packages are sold out.

**Bridge Mutual**

Bridge mutual doesn’t have UST insurance, but they offer Anchor insurance. The Anchor plan only covers smart contract risk.

All of these DeFi protocols have native tokens and all of them are relying on Anchor & UST for >25% of protocol earnings. If less capital flows to Anchor these protocols will have much lower earnings. It’s not just 25% less as the premium on Anchor coverage was higher than the premium paid for deposits in more established protocols like Curve.

An hour ago I wrote a twitter thread on the impact that lower Anchor deposits could have on insurance tokens, check it out if you’re invested in one or if you want to short any of them: [

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4 thoughts on “DeFi insurance in the aftermath of the UST de-peg”

  1. i never believed in those insurance companies, they are way way early stages for such a thing….frist security in defi zone needs upgrade and then insurance policies will come,

    &#x200B;

    it was just a way of wasting gains and think one sleeps safely at nights : )

    Reply
  2. Sounds like the insurance companies are going to need insurance companies if they have to pay out claims on UST

    Reply
  3. 5 examples of Insurance companys and their oferrings.

    And none of them, cover what happend with UST in the last 2 days?
    Like normal Insurance companies, it’s nothing but a scam then…

    Reply

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