Utilizing liquidity pools Ensuro creates opportunities for investors, insurers, and insurees; by underwriting unique, pre-specified payout insurance contracts.
Ensuro offers parametric insurance, which is insurance that offers a pre-specified payout based upon a trigger event; not the typical, variable payout insurance one may currently have for everything from their laptop to their house. It falls into the world of Insurtech, which is a new technology offered to insurance companies. There are three central elements to the Ensuro platform:
Liquidity providers, LPs, provide capital, in the form of stablecoins, to smart contract governed liquidity pools. Which pool their assets become a part of is defined by the amount of time the LP is willing to wait to receive their fund once they’ve requested to withdraw them; this is called the cashback period. This delayed LP payout system allows the protocol to plan ahead and manage the capital to ensure it doesn’t run out of funds to cover currently active policies.
Risk Module Providers
Here it is worth noting that Ensuro doesn’t actually insure people, its underwriter policies written by Managing General Agents, MGAs. These MGAs are connected to the Risk Module and this is where they propose new insurance contracts to the platform which either accepts or rejects them.
The performance of each MGA is monitored to ensure they are performing satisfactorily, i.e. not trying to dupe the system, and if they are performing satisfactorily then the platform will continue to underwrite the policies they propose.
The capital collected in liquidity pools isn’t only for underwriting insurance, some of it, potentially all of it if the platform doesn't underwrite any policies, will be reinvested in high liquidity, low-risk DeFi protocols; often those offering over-collateralized loans. This provides additional returns for LPs.
When an LP deposits capital into a liquidity pool they receive tokens, π-eTokens, representing their stake in that specific pool. Each token is minted upon deposit and burned upon withdrawal of the capital. Reward distribution is calculated by taking into account two factors: the LPs deposit size and the length of their cashback period. Those who obtain insurance through the Ensuro protocol are provided with an NFT representing their unique policy. When payout is required funds are sent to the wallet holding the NFT.
Ensuro is currently operating on the Ethereum blockchain but has plans to be a part of the Cardano ecosystem once smart contracts are launched on the network.