InsurAce Protocol
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Staking Risks

Understanding staking risks before investing.
When staking your assets, you are trading liquidity risk for protected returns via the underwriting mining pool. Rewards are not guaranteed as these are always subject to changes in the InsurAce protocol, market conditions, and other external factors.
In general, funds staked may be affected by:
  • Stake Impairment Loss
  • Locking period
  • Solvency Capital Requirement
  • Liquidity and Volatility

Stake Impairment Loss

Tokens staked in underwriting mining pools are used to build up capital which is critical to the InsurAce protocol's ability to provide cover. Claim Payouts as a result of successful Claims rely on financing by assets staked in the InsurAce protocol.

Claim Payouts

In the event a Claim is approved, tokens staked in the underwriting mining pool may be used for the Claim Payout if the funds collected from Cover sales were insufficient. As explained in Staking Mechanism, when the principal token amount is deducted from the underwriting mining pool, the amount of funds an underwriter is able to withdraw is reduced.
The rules for Claim Payouts from capital pools are illustrated below:
  1. 1.
    Claim Payouts will first draw on the pool of available Cover Payments that were collected from Cover sales. A maximum of 20% of such funds available may be used to finance a single Claim.
  2. 2.
    If 20% of available Cover Payments remains insufficient to cover the whole Cover Payout amount, principal tokens from the underwriting mining pools will be used to settle the balance of the Cover Payout amount after accounting for funds from Cover Payments.
  3. 3.
    Based on exchange rates and pool size, capital will be taken from underwriting mining pools in proportion to their staked value.

Cyberattacks

There is always an inherent risk of cyberattacks occurring. In the event of a cyberattack on InsurAce protocol's capital pools, staked tokens or assets may be unexpectedly drained as well.
Please note, the tokens or assets staked in the InsurAce protocol's pools under the Cover Arm are not entitled to any coverage from InsurAce.io.

Lockup Period

When you stake your tokens, they will automatically be locked in for 15 days. During this time, the locked tokens cannot be unstaked, transferred, or traded until the end of the 15-days lockup period.
Stakers can unstake their funds as soon as the lockup period ends. However, if you initiate another staking action before the 1st lockup period ends, the lockup period will be recalculated and the unstaked amount will only be withdrawable after the latest lockup period ends.

Solvency Capital Requirement

As elaborated under Capital Management, the SCR is the amount of funds required to hold to ensure that the InsurAce protocol is able to meet its obligations to its Cover Purchasers over the next 12 months with a 99.5% probability, thereby limiting the possibility of becoming insolvent to less than one (1) in 200 cases. InsurAce.io uses SCR as the capital management standard to calculate the minimum amount of capital required to be set aside to pay for all potential claims considering all quantifiable risks.
InsurAce.io derives its coverage capabilities from capital pools under the Cover Arm and Investment Arm. In the event that the SCR% = Capital Pool Size / SCR falls below a certain threshold, withdrawal of staked funds will be constrained to enable the InsurAce protocol to meet its SCR.
Learn more about SCR calculation.
Check SCR% here: SCR% Data

Liquidity and Volatility

Given the volatile nature of crypto assets, users are advised to always be aware of the risk of financial loss that may result from volatility in asset value and available liquidity.