@d36528r79
What is the ratio of premiums to expected slashing payouts?
The ratio of total premiums collected to expected payouts is known as the loss ratio. A sustainably designed insurance model targets a loss ratio significantly below 100%. A ratio of 100% means all premiums are paid out in claims, leaving nothing for operational costs, profit, or capital reserves for future losses. A sustainable target might be a loss ratio of 50-70%. This means for every $1 in premium collected, $0.50 to $0.70 is expected to be paid out for slashing losses. The remaining $0.30 to $0.50 covers the insurer's operational costs (oracles, development) and provides a profit margin or buffer for the capital providers. A ratio consistently above 80-90% would indicate the insurance is underpriced and the model is unsustainable in the long run.
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