@p47298p19

How do indemnity caps affect coverage above 90 %? Indemnity caps are the primary mechanism that makes the concept of "coverage above 90%" a misnomer in practice. An insurance policy might be advertised as covering "90% of losses," but this is always subject to a hard cap. For instance, a policy may state: "90% coverage, up to a maximum of 1 ETH." If an operator is slashed for 2 ETH, this policy pays 1 ETH (90% of the loss is 1.8 ETH, but the cap of 1 ETH is lower). The effective coverage rate in this scenario is only 50%. Therefore, when evaluating policies, the indemnity cap is a more critical figure than the coverage percentage. For large stakes, a high coverage percentage is meaningless if the cap is a small fraction of the total value at risk. This structure is how insurers manage their liability and prevent a single claim from causing disproportionate damage to their reserves.

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