Ensuro: A Decentralized Insurance

A Decentralized liquidity pool that acts as a licensed insurance fund to back up parametric insurance products.

C-suite comes from VC, Blockchain (L2), Reinsurance, 25yr+ Software Development, PhD Mathematics, Ms Physics, Financial Risk Management.

Introduction

There's a growing number of Managing General Agents (MGA's) entering the market with new technologies and seeking alternatives to the traditional sources of insurance capacity. The Ensuro team developed a decentralized platform to collect and deploy insurance capital to meet that growing need for capacity.

Ensuro matches capital and insurance risk in a unique way. In providing capital, Ensuro aggregates incoming funds - in the form of stablecoins - from a constellation of institutional and retail liquidity providers (LPs). In assuming risk, Ensuro partners with MGAs and uses its reserves to support their products. By charging a commission, Ensuro secures revenues for its liquidity providers and itself. Consequently, Ensuro sits between liquidity providers (seeking higher investment returns) and MGAs (looking to access capital at affordable conditions) and is innovative for both.

As an investment solution, Ensuro is part of the growing Decentralized Finance movement. The Decentralized Finance (DeFi) protocols aim to provide traditional financial instruments without relying on centralized intermediaries, but rather using blockchain technology and smart contracts. DeFi is experiencing remarkable growth: having only appeared in 2019, its protocols currently handle more than US$ 80b and are adopted by more than 2.5 million users worldwide. Institutions are showing a growing interest in DeFi, allured by its success, efficiency, global reach, and decentralized structure. DeFi users can currently - among other possibilities - get loans, trade currencies, and speculate on price movements of a broad set of assets. While these options are very mature, the decentralization of the insurance sector is still in its infancy. Ensuro aims to be the first protocol to guarantee DeFi users the possibility of accessing insurance risk, providing them with an additional source of returns and a way to diversify their investment portfolios. 
The Opportunity

The new wave of MGA's disrupting the traditional insurance space requires not only insurance capacity but also a partner who understands the need for new technology to drive out the embedded inefficiencies which exist in current market practices. Ensuro addresses both of these requirements (1) by tapping into the huge volume of innovative capital, which is growing exponentially and flowing into Decentralized Finance (DeFi), to provide insurance capacity and (2) by using smart contracts on blockchain technology to introduce a new level of operational efficiency.

Competitors. Ensuro's competition can be divided into two main segments, traditional and non-traditional competitors.

Within the traditional ecosystem, the main competitors are insurers, reinsurers, and the Insurance-Linked Securities market.

• Insurance and reinsurance are the natural competitors of Ensuro, providing underwriting capital to support both their own products and external MGAs. Having owned the majority of the insurance value chain with little/no competition, the legacy system had defined policies and processes standardization, solvency regulations, and economy of scale. However, the current set-up benefits established players to the disadvantage of policyholders, brokers, and those at the periphery of the insurance value chain. At the bottom of the insurance chain, insureds face inflated premiums to bear the costs of overheads, cost of capitals that ranges from 2% to 15%, and frictional compliance. Opacities and delays in claim assessments and payouts bring costs that take up about ~40 % of insurance revenues on average. Ensuro's model challenges incumbents by imposing itself as a cheaper alternative for MGAs and providing an appealing investment for liquidity providers. Through its smart contracts, Ensuro manages policies in a completely automated fashion, reducing overheads from 25% to 1% - 3%, whilst offering a reduced cost of capital as a result of supplementary returns coming from investments in the DeFi space.

• Insurance-Linked Securities (ILS) are financial instruments whose values are driven by insurance loss events. As securities, some ILS can be and are traded among investors only on the secondary market. Insurance-Linked Securities allow insurance and reinsurance carriers to transfer risk to the capital markets and raise capital or capacity. Policies covered by ILS (usually cat bonds) must be fully collateralized, increasing their cost of capital. Annualized returns of Global Hedge Funds with investment strategies in Insurance-Linked Securities averages around 2% (reference Heurekahedge database). Through its smart contracts, Ensuro gives access to insurance risk at a level unmatched by the current ILS market, which remains out of reach for retail investors.
  For the ILS investors, Ensuro offers a more dynamic and liquid solution for participating in insurance risk. Indeed, ILS suffers a trapped-capital problem: when an ILS contract is seen to be at risk of facing losses, the cedent can call for the collateral to be trapped or frozen, so it remains available while loss development continues. The collateral is trapped and unavailable for reinvesting, which can create a drag on ILS investment portfolios. The capital can remain trapped for months or years until the ultimate loss associated with the contract is clear and a payout is deemed due or otherwise. Ensuro mitigates this issue in two different ways. First, the functioning of the protocol is such that an investor can always liquidate its share of the collateral as long as another investor is willing to take her position; second, Ensuro will initially focus on parametric products with short tail liability, and its policies are handled automatically by smart contracts. For each policy, if the conditions for a payout are met, the smart contract reimburses the policyholder; otherwise, the policy's collateral is released immediately at the policy's expiration.
  Finally, due to differences in solvency capital requirements, we expect Ensuro's pools to be a more profitable investment than ILS.

 Non-traditional competitors are insurance projects of the Decentralised Finance ecosystem. The main players are Nexus Mutual, Cover Protocol, and Etherisc.

• Nexus Mutual is a crypto mutual fund focused on policies against smart contract failure and exchange hacks. Similarly, Cover Protocol is a peer-to-peer coverage market that allows DeFi users to be protected against smart contract risk. Both projects are non-licensed; hence they are currently covering a non-regulated segment of the insurance market. Nexus Mutual's current Total Value Locked (TVL) is 504.74M with 0.13% of supply locked in the protocol (up to date). Cover Protocol's current Total Value Locked (TVL) is 840K, dropping from 50M in December 2020 and 25M in February 2021, with 0.01% of supply locked in the protocol (up to date). Thanks to its license, Ensuro expects to operate as a regulated reinsurer and, differently from Nexus Mutual and Cover Protocol, will have access to a larger segment of the insurance market.

• Etherisc is a decentralized insurance protocol to collectively build insurance products, which dates back to 2016 and pioneered research in blockchain based insurance. Etherisc is currently offering technical guarantees for payout instead of legal guarantees, fully relying on the immutability and transparency of smart contracts technology. Etherisc's legal structure defines Etherisc's contracts as simple service contracts instead of insurance contracts, effectively transforming the concept of premium into service fee and the concept of insurance into protection, with the consent of German regulator BaFin. Etherisc is currently operating in the Flight Delay insurance space, which represents the only licensed insurance product it offers, moreover, Etherisc is exploring Hurricane protection, Crypto Wallet insurance, Crypto-Backed Loans protection, Crop insurance and Social insurance, being at the stage of designing and prototyping such products. Etherisc's current market cap ranges around 30M, dropping from 70M in March 2021. Thanks to its license, Ensuro expects to operate as a regulated underwriter and, differently from Etherisc, will have access to a larger segment of the insurance market.

The Team

• Marco Mirabella - Chief Executive OfficerMarco was the Chief Strategy Officer of BigGo, the biggest price comparison website and vertical search engine in South East Asia. Before joining BigGo, he was the founder and Chief Business Development Officer at Cartesi, an off-chain decentralized computational platform for permissionless blockchain. He was an analyst and business developer manager for SOSV, a 800m USD VC based in San Francisco, US.Marco is an advisor for Lidbot, an indoor waste management company and BigGo.He holds a double bachelor degree in Mechanical Engineering and Management Engineering from the Polytechnic of Milan and Tongji university of Shanghai.
  LinkedIn profile: https://www.linkedin.com/in/marco-mirabella/

• Guillermo Mario Narvaja - Chief Technology OfficerGuillermo was the founder and CEO of two cash-flow positive startups, Radiocut: platform for listening for radio on demand with over 1m monthly active users and Fierro, an ERP company. Guillermo has over 20 years of experience in software development. He holds a bachelor degree in Computer Science from the University of Buenos Aires. He is one of the members of the Plutus pioneer program.
  LinkedIn profile: https://www.linkedin.com/in/guillermonarvaja/

• Luca Mungo - Chief Science OfficerLuca is currently a Ph.D. candidate in Mathematics at the University of Oxford. He was an Associate at the Boston Consulting Group, where he focused on data-science projects in the retail industry. He holds a double Master degree in Physics of complex systems from Polytechnic of Turin and Sorbonne University. He has a bachelor degree in Physics from Sapienza University of Rome.
  LinkedIn profile: https://www.linkedin.com/in/luca-mungo-a26278103/

• Gian Giacomo della Torre - Chief Risk Officer
  Giacomo is a Junior Quantitative Risk Analyst for the Credit Risk modelling team at ABN AMRO Bank, Before ABN Amro, Giacomo worked as data scientist at FinScience - investment AI and as a data analyst for Booking.com. He holds a double Master degree in Physics of complex systems from Polytechnic of Turin and Sorbonne University and obtained a Bachelor in Physics Engineering from Polytechnic of Milan.
  LinkedIn profile: https://www.linkedin.com/in/gian-giacomo-della-torre-575b02114/

• Colin McQueen - Chief Financial OfficerColin is a Fellow finance professional who has been working in international re/insurance markets for over 30 years in various senior roles. He is presently Managing Partner at advisory, Latin Partners Ltd and previous employers include Marsh, XL Re, Equator Re and Markel Latin America where he served as CFO. Colin has worked with two start-up companies and is currently a director on two Bermuda domiciled insurance companies. He holds a Bachelor of Arts Degree in Accountancy from Glasgow Caledonian University in Scotland, is a Fellow of the Institute of Chartered Management Accountants and holds the Certificate in Company Direction from the Institute of Directors (UK).
  Linkedin profile: https://www.linkedin.com/in/colin-mcqueen-55454b13/

• Joe Monk – Actuarial Consultant
  Joe Monk is a freelance consultant having qualified as a Fellow of the Institute of Actuaries in 1999. He started his career in 1995 at Lane Clark & Peacock, a London based actuarial consultancy, progressing to be a senior partner and practice head. In 2010 he moved in-house, joining Alterra (previously Max Capital) as Global Chief Actuary. After Alterra's sale to Markel in 2013 he joined Pioneer Underwriters as Chief Actuary, before setting up as an independent consultant in 2018. Joe holds an MA in Economics from Cambridge University
  Linkedin profile: https://www.linkedin.com/in/joe-monk-81551318/ 

Advisors

• Darren Camas
  Darren has been involved with crypto & blockchain since 2011 advising, building, and investing in multiple projects. Currently he is CEO of IPOR Labs. He is also Co-founder of FoolFarm, the first AI venture builder in Europe.
  Previously he served as an advisor for the Cardano (ADA) blockchain, headed biz dev for one of the first global crypto exchanges, and has been recognized for his FinTech startups by institutions such as SWIFT and BBVA. On the institutional investor side he served as advisor to Emurgo, the venture arm of Cardano, and is an angel investor in blockchain startups. Originally from the US, he spends most of his time in emerging markets in Asia and Latin America.
  Linkedin profile: https://www.linkedin.com/in/dcamas/

• Christopher Lowell
  Chris is the former Head of Innovation at The Hartford and Managing Director of Corporate Strategy at Liberty Mutual with expertise across P&C and extensive experience in international insurance markets. Founding member of the RiskBlock Alliance (now RiskStream Collaborative) - the leading insurance industry consortium focused on blockchain and DLT. Having launched Putty Insurance, I continue to focus on building new insurance concepts and business models to drive the risk management industry forward. Degrees and certifications include: BA degree from Harvard University (Applied Mathematics); MBA from MIT Sloan; Masters of Science, Finance from Northeastern University; CPCU – Chartered Property & Casualty Underwriter
  Linkedin profile:https://www.linkedin.com/in/christopher-lowell/

Protocol Description

The Ensuro protocol is comprised of three main components:

• Liquidity pools: Ensuro creates dynamic pools governed by a smart contract on the blockchain (from now on, liquidity pools) where Liquidity Providers (LPs) can deposit money under the form of stable coins (e.g.,USDC), defining their acceptable cashback period, i.e., the amount of time they are willing to wait to receive their money3. The presence of well-defined cashback periods permits the protocol to plan ahead and compute the amount of capital available at any point in the future. With this forward-focused vision, Ensuro can always operate at the desired solvency level. Insurance is a profitable business. Being the heart and the fuel of the protocol, liquidity providers will share the profits from the pool, depending on the scale of their deposit and the duration of their cashback period.

• Risk modules: Ensuro's partners will have access to the protocol's liquidity through our Risk Modules. Each risk module will be connected to a specific insurance product. To protect the Liquidity Providers, the Ensuro Risk Monitoring Module will perform proper back-testing of potential risk modules and Quality Assurance Tests (QA) on the outstanding ones to check that their performance is in line with expectations, and correct for possible deviations.

• Asset manager: Ensuro's asset manager component will rule the interaction of Ensuro's reserves with other DeFi protocols. Specifically, the asset manager will deploy a part of or the total fund in other risk-free protocols (e.g., Aave) to provide additional returns to the liquidity providers. 

Benefits of Ensuro

Ensuro's model will bring several benefits to the entire insurance business chain. Through its smart contracts, Ensuro manages policies in a completely automated fashion. This feature helps to reduce overheads, benefiting the policyholders. Moreover, the automatic, transparent, and trust-less verification of a policy's trigger reduces the possibilities of fraud and eliminates any effort in the claiming process, ultimately benefiting both the policyholders and the partner MGAs. For MGAs, working with Ensuro has an additional benefit. Thanks to the openness and immutability of data stored in the blockchain, the performance of insurance products is recorded and available for audit, providing MGAs with solid proof of their models' validity and visibility to investors.

Ensuro will open the insurance risk market to retail and institutional investors. So far, access to this type of risk - suited to the creation of diversified investment portfolios - is denied to retail investors and still cumbersome for larger players. Due to differences in solvency capital requirements, we expect Ensuro's pools to be a more profitable investment than ILS, one of the few alternatives currently available to access insurance risk.

Finally, Ensuro will be able to provide capital to MGAs at convenient terms. Indeed, Ensuro's liquidity providers will experience supplementary returns on their investments thanks to the protocol's interaction with other players in the DeFi space such as Aave (https://aave.com) or Compound (https://compound.finance). These extra sources of revenues can help Ensuro to propose capital at a cost on the cheaper side of the spectrum while satisfying the LPs return expectations.

Current Status

1. Ensuro's smart contracts are completed and can be viewed here: https://github.com/ensuro 
   The smart contracts will be audited the first week of September
2. Whitepaper available here: https://ensuro.co/Ensuro_WP.pdf
3. Won the first prize in the Binance Hackathon: The Future is now: https://gitcoin.co/hackathon/projects/binance/ensuro/
4. Joined Celo Camp Batch3 and  won the Celo Innovating on Money Award : https://medium.com/celoorg/announcing-the-grand-prize-winners-of-celo-camp-batch-3-58dd0eef19fc
5. Started the process to obtain a license as Insurance General Business (IGB) under the innovation sandbox in Bermuda

Go To Market

As a first step Ensuro plans to complete the process to obtain an insurance license in Bermuda. As a requirement of the license we will need to onboard at least 2 MGAs into our protocol. The team has already identified them and is in the process of closing an agreement with them. The first partner will provide hurricane insurance for homeowners and the second is commercial flight delay insurance. 
After the sandbox license is completed the team plans to obtain a full license as insurance company in Bermuda.

Estimated Roadmap

2021 September:

• Obtain IGB License in Bermuda
• Finalize smart contract audit 

2021 October

• Provide coverage for the first insurance policy (hurricane insurance)

2022 Q1

• Onboard on the protocol second MGA (commercial flight delay insurance)

• Develop automatic QA system to check the performances of the MGA

• Reimplement contracts for Plutus

2022 Q2

• Develop system to allow LPs to invest using fiat currency directly and isolate them from the complexity of the blockchain 

2022 Q3

• Graduate from the sandbox program
• Apply for full license in Bermuda 

2022 Q4

• Partnership with a micro-insurance parametric MGA provider and identify NGOs for premium subsidization in emerging countries 

Ask

We are asking for 50k USD in order to reimplement our smart contracts from Solidity to Plutus. We will also use the funding to hire a full time front end developer that will help us develop the interface to onboard liquidity and monitor the performance of the protocol.