Nexus Mutual
One provider as an object lesson, not as a recommendation
What kind of thing this is
Not an insurance company but a mutual - a model that has existed in insurance for centuries, here mapped onto a blockchain.
The basic idea is simple: many pay into a common pot, and whoever suffers a loss gets something out of it. There is no company earning a profit in between, because the members of the mutual are at the same time its owners.
Two things distinguish this provider from an ordinary mutual society: membership is tied to a token, and losses are decided by members, not by a claims department.
Who carries the risk
The members - and that is not a turn of phrase but the heart of the matter.
Buying a cover is not buying from somebody but joining a mutual. That requires admission, including an identity check; it is not an anonymous process, even though everything around it runs on a blockchain.
The common capital is available for all covers at once. Two things follow from that which do not exist with an insurer:
| Capacity is limited | There is no unlimited amount to cover, only as much as the pot carries. For a single protocol the cover is therefore capped in amount - and can be used up. |
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| Large losses hit everyone | A very large loss reduces the capital from which everyone else is also served. The members carry that together, economically and in the value of their holdings. |
How a loss is decided
Here lies the real difference - and the place to look closely.
With insurance the insurer assesses and can be reviewed in court if there is a dispute. Here members assess the loss notified. They stake their own tokens on their judgement: whoever judges in line with the outcome is rewarded; whoever judges against it loses part.
The procedure is meant to produce objective decisions this way, without a central body being necessary. But it also means: the decision lies with a community that is itself affected - every loss paid reduces the common capital.
The six questions this example raises
| Does a legal claim arise? | Or a discretionary payment? This question comes before all others and is rarely answered openly in product descriptions. |
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| Who decides the claim? | The provider, a committee, the members, an external expert? And what happens if they disagree? |
| Where does the capital come from? | The own funds of a supervised company, or money paid in by the participants? What is left after a large loss depends on it. |
| Is capacity limited? | With common capital, as a rule yes - per protocol and overall. A sum insured on paper is not the same as capacity that exists. |
| Which supervision applies? | And in which country? For a client in Austria that is no side issue. |
| What is excluded? | Different with every provider, and the exclusions rarely carry the heading you look for them under. |
Where this leads
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Seven risks and the questions a wording has to answer about each of them.
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The four conditions and the sequence from asset to claim.