Crypto AM shines its Spotlight on NAYMS
NAYMS is building the world’s first insurance market that allows Institutional crypto-holders to underwrite cryptocurrency risk.
“In 1686, individuals called ‘names’ came together to cover risk of all varieties by pledging capital in return for a yield. The Lloyds of London marketplace was born. It’s now 2020, and NAYMS is bringing together capital markets and brokers via a smart contract powered platform to create the most efficient capital provision ecosystem for the world’s digital risk in 333 years” said Dan Roberts, Co-Founder & CEO.
NAYMS grew from the problem of traditional insurance capital seeking to gain exposure to cryptocurrency risk in the hope of generating returns from the growing market. The approach they took however was flawed by one main issue – insurance capital markets are using US dollars to underwrite risk denominated in Bitcoin, or Ether, or any other crypto. This resulted in a pricing problem, where insurance companies become either over or under-exposed when the price of the underlying digital asset moves. The high levels of volatility characteristic to the market makes this method of underwriting very inefficient and has meant a cap has been placed on the capacity being provided to cover crypto-related losses. Such cover is vital for further adoption in the space, highlighting the need for a collaboration between the cryptocurrency and traditional financial markets.
NAYMS is entering the world of risk by using what they believe is the most appropriate tool to do so, blockchain, through allowing crypto-holders to invest in crypto-related risk. This risk could be digital assets held within a custodian for example, and would be denominated in the same currency as the underwriting capital that is providing the cover. Think BTC covering a BTC loss, ETH covering an ETH loss, and so on. The loss does not have to be denominated in crypto however – you can use the DAI stablecoin to cover any fiat denominated losses, exposing the NAYMS capital provision platform not only to the emerging risk growing in the crypto space, but all the world’s existing risk in the same traditional insurance industry. NAYMS received funding and is being incubated by InsurTech Gateway, a London based Insuretech fund under Hambro Perks and MakerDAO.
Insurance today…
On the surface, insurance is pretty easy to understand. It is money covering the loss of money. That loss of money can occur from a car crash, a flood, a lost phone, cyber-attack or even a particularly heavy wind with a claim being requested through a few taps on your mobile phone.
Under the surface however the insurance industry starts to look pretty complicated. The pay-out to cover losses can be based on specific triggers, can be paid out based on an exact loss amount or some other measure such as pre-determined parameters, and can take days, weeks, months or even years to settle. The risk held by the party providing the cover can be transferred between insurers, reinsurers and capital markets. There are a significant number of different parties that all have various roles and interests in the flow of insurance business, from local and regional brokers to asset managers, insurers and the insured. The variables are endless.
This complexity exists in an industry that has foundations that were built in the 17th century. However the fact remains: the insurance ecosystem is one that is vital for the vibrancy, liquidity and growth of the economy, providing protection for our population, and allowing capital to be efficiently allocated. With this in mind, you can simplify the complexity of this industry down to one simple idea: the insurance contract.
So, in a future where insurance is digital, what does this insurance contract look like?
NAYMS believes this contract will know what parties are involved and what their respective roles are. It will know how much cover is being provided and for what specific risk. It will know when it should be paid out, in what amount and what parties have decision making power in various situations. It will limit the liability of those providing the cover, will ensure zero counterparty risk and will give capital providers the choice of how much exposure to take depending on their risk appetite. The contract will need to be transferable to other parties in a transparent environment where buyers know they are seeing market rates, and will need to track this transactional activity in real-time along with the new parties now attached to the contract.
It will need to be flexible so that new data driven methods to automate pay-outs can be attached to the contract. It should be able to generate anonymised and standardised data to benefit the participants of the ecosystem that it serves, in a way that grows in value the longer the ecosystem is operational. And its flexibility will need to extend to catering for different types of contracts, from fully-collateralised reinsurance capacity to under-collateralised insurance pools.
What they do know for certain however is that it’s not a piece of paper. It is a digital, tradable, transparent, traceable contract of insurance, and they call it the ‘NAYMS Smart Insurance Contract’.
What’s in store for NAYMS moving forward?
NAYMS has recently launched the Beta of its platform, enabling approved brokers to test contracts for their clients that can then be collateralised by capital providers under Bermuda’s regulatory sandbox environment. With their first pilots cohort going live shortly, and a second cohort of re-insurance cases planned for Q3, NAYMS is setting itself up for an exciting year ahead.
For further information visit https://nayms.io
Dan Roberts – [email protected]