2.6.3 Asset Insurance Rating

Asset Insurance Policy & Rating

Insurance providers collaborate with asset administrators to establish digital, self-executing contracts. These agreements automate coverage payouts to holders of digital, tokenized rights associated with the onboarded asset.

Agreement Specifications:

  • Covered Rights: Specifies the types of token standards eligible for coverage.

  • Payout Triggers: Outlines the conditions under which insurance payouts are initiated, including both automated and manual triggers.

  • Insurance Sum: Defines the total coverage amount.

  • Premium Sizes: Details the cost of insurance premiums.

Insurance Rating Criteria:

The insurance rating evaluates the security and reliability of the asset's insurance coverage based on:

  • Coverage Ratio: The proportion of the insurance sum to the asset's market value.

  • Event Frequency: The regularity of insurance-triggering events.

  • Payout Sum: The aggregate of insurance payouts made.

  • Claimant Count: The number of token holders who have successfully claimed insurance.

  • Recent Claim Amounts: The average weighted sum of successful claims over the past week, month, and year.

  • Risk Rating: The insurance risk rating assigned by the provider.

  • Additional Metrics: Various detailed metrics instrumental in determining the final insurance rating.

Rating Scale:

  • A score of 0 indicates the absence of insurance coverage.

  • A score of 100 represents full market value coverage, no occurrence of insurance events, and the lowest insurance risk rating. Hence if insurance providers state high insurance risk or insurance events occur frequently, having 1:1 coverage will not be sufficient to gain 100 points.

Rating Calculation:

The insurance rating is multiplied by the insurance provider's reputation score. When multiple providers are involved, their ratings are added together, not averaged. This approach permits the possibility of 'over-insurance' of an asset on the OAE platform, enhancing its perceived reliability.

However, it's important to note that the cumulative payout from all insurance providers cannot surpass the asset's market value. This safeguard prevents the potential exploitation of insurance mechanisms, where profit could be sought from deliberately triggering insurance events.

In the context of an Asset GOR profile, the insurance rating is not benchmarked against a theoretical maximum (which in this case would mean achieving coverage from all insurance providers within the IAC system for the asset's full market value). However, other evaluative methods, such as positioning within a ranking and comparisons against average values, remain relevant and are applied.

It’s important to note that for comparison perspective, the size of insurance sum is irrelevant - what matters is what % of assets’ market value is covered by the insurance, combined with insurance risk rate and frequency of insurance events.

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