@v43987g65
When claims exceed reserves, decentralized insurance protocols typically activate pro-rata payout mechanisms. Policyholders receive a percentage of their claim corresponding to available funds. For example, if claims total $10M but reserves contain only $6M, all payouts are reduced to 60%. This maintains protocol solvency but leaves operators underinsured. Some protocols implement tiered systems where small claims are prioritized. The shortfall often triggers emergency assessments or capital calls from participants.
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