Decentralized underwriting

??Insurance DAOs (iDAOs) for creating decentralized underwriting markets, based on this paper.

Insurance DAO protocols

Components

1. DAO = {Underwriters}
2. Underwriter ∋ REP tokens a) Propose contracts with REP b) Police contracts with REP
3. Insurance contract (Work smart contract)
4. Validation Pool

Token scheme

Workflow

(See Figure 1.)

1. Underwriter $U_{1}$ sells a contract to a customer.
2. $U_{1}$ encumbers the canonical amount of REP in the contract.
3. Contract Validated by DAO.
4. Customer a) pays premia, or b) defaults, or c) claims
5. DAO a) mints REP for $U_{1}$ proportional to premia & distributes REP salary, or b) cancels contract, or c) pays claim by selling encumbered REP at market

Consequences

Properties engendered

• More auditable/transparent
• More stable, trustworthy
• More meritocratic (rewards and punishment are isolated to the agent)
• Democratized access to participation at all levels

Capital reserves can be eliminated

economic justification

Where we stand practically in deFi

Missing:

• (d) oracles
• *adjudication
• (d/e) stable coin
• (e) smart contracts
• regulatory clarity