In-depth analysis of the world's first regulated on-chain insurance project: Nayms

06/03/2023·1years ago

Nayms is an insurance technology company. In the face of the opaqueness, slowness, and inefficiency of the traditional insurance industry, the new project Nayms introduces blockchain technology to make the insurance industry transparent and efficient, while also elevating risk pricing and insurance business management to a new level.

Nayms is also the only company that has obtained both a cryptocurrency license and a commercial insurance license, making it the world's first fully regulated insurance project on-chain.

Nayms has perfectly combined centralized supervision and accountability with the characteristics of decentralized finance (DeFi). Nayms's insurance business is fully regulated in Bermuda, the world's third-largest insurance jurisdiction, with regulation provided by the leading-edge regulatory authority Bermuda Monetary Authority.

Now, let veDAO lead you to a detailed understanding of Nayms's unique design and operation.

Segregated Account Company (SAC)

Nayms is registered in Bermuda as a Segregated Account Company (SAC), with the statutory power to issue segregated accounts, each of which is owned by the investors of that account. A segregated account is defined in the relevant "legislation" as a separate and distinct pool of assets and liabilities managed by the same institution.

In the Nayms market, each underwriter with capital is actually an independent account, each with its own unique business plan. The technical affairs and operational licenses of the segregated accounts are managed by Nayms's SAC.

Sponsor

Each segregated account is established at the request of a third party (referred to as the sponsor). Sponsors can create native cryptocurrency insurance businesses based on their professional knowledge and understanding of encrypted insurance. Sponsors need to provide various information and detailed business plans as required by Nayms to apply for the creation of an insurance business. The complete application is reviewed by Nayms for comprehensiveness, reasonableness, and consistency with internal benchmarks, and the final decision is made to approve or reject the application.

If the sponsor's application is approved, Nayms's SAC will open a segregated account in the name of the sponsor, who is responsible for implementing the insurance business plan and ensuring that the account has sufficient capital and prudently deploys funds. The sponsor is required to assist Nayms in managing the account, including conducting business, maintaining adequate capital levels, preparing financial statements and regulatory filing requirements, and facilitating audits. The sponsor receives compensation through methods agreed upon with Nayms in advance.

Capital

Insurance companies must have sufficient capital before underwriting business, as capital is the ultimate reserve for claims. The capital raising for segregated accounts in Nayms is conducted through token swaps, meaning each segregated account obtains capital by selling ERC-20 tokens of the account. The price of the ERC-20 tokens to be sold (also issued) is set by the sponsor, and the price multiplied by the quantity of ERC-20 tokens to be sold should be the required capital level for the segregated account. The type and amount of capital in the segregated account are applied for and approved by Nayms, and the types of capital can include wrapped Bitcoin, Ethereum, stablecoins, etc. Fund providers enter into agreements with Nayms to receive economic benefits and other rights according to the terms and conditions of the agreement. The process of obtaining capital and the management of capital are recorded on smart contracts, which are publicly transparent, and anyone can verify them through a blockchain explorer.

Schematic diagram of the process of capital providers injecting capital into segregated accounts

Each segregated account has its corresponding ERC-20 tokens, which are equivalent to LP tokens, and the holders have the right to receive investment returns. The sponsor is responsible for determining when their account has a surplus (defined as assets exceeding insurance liabilities) and submitting this to the SAC board at the appropriate time. If both parties agree to distribute the surplus, they instruct the controlling smart contract to execute the operation. The surplus from one distribution to the next accumulates until the user chooses to withdraw the funds.

Account ERC-20 tokens can only be traded on Nayms's internal market and cannot be traded on external markets (because they need to be registered for transfer). In its internal market, account ERC-20 tokens are divided into primary and secondary markets, with the tokens sold for the initial capital raising of the segregated account being the primary market, and the trading of account ERC-20 tokens after the account has been launched and is operational being the secondary market. Fund providers invest and trade based on their considerations of the sponsor's business plan and reputation. Secondary trading can be priced at face value, discount, or premium, depending on the performance of the segregated account. According to Bermuda law, detailed information of the latest token holders is recorded in the company register of the account owner each time a transaction occurs. The registered online version is updated almost in real-time.

When a segregated account is ready for liquidation, whether because it has reached a pre-agreed maturity date, or based on the sponsor's judgment or Nayms's instructions, the account has ceased operations, all current and future liabilities have been settled, and all investments have been liquidated, a "reverse" token exchange occurs. Nayms's smart contract is required to repurchase all ERC-20 tokens of the segregated account from the fund providers in exchange for all available funds in the account. Once liquidation is initiated, subsequent operations occur automatically, and after liquidation, the register of the account owner (ERC-20 token holders) will be cleared, and the account will be closed.

Underwriting and Claims

Once the segregated account has fully raised capital, it can start selling insurance. Insurance contracts can be set by underwriting experts, who can be the sponsor themselves or one of their representatives, and they can access Nayms's online underwriting software or "Policy Builder." The Policy Builder is used to generate a schedule or declaration page for each insurance contract, including participant identities: specified insured, underwriter, broker, and claims manager, as well as underwriting details: risk rating, total insurance limit, total premium and payment period, and commission fees, etc. The Policy Builder also allows users to upload documents in PDF format. The schedule and documents together constitute a complete insurance contract.

Any underwriter with underwriting rights for a segregated account must adhere to the account's underwriting guidelines, which are formulated by Nayms based on the sponsor's input in their application. Any part of the underwritten insurance contract that exceeds the underwriting guidelines must be submitted by the underwriter to Nayms for review to see if it can be approved. Before issuing the final insurance contract on the Policy Builder, Nayms reviews the policy, and the review sequence depends on the underwriter's authorization level.

When a claim is made, the claims processing procedure submits a request to Nayms for confirmation. The insured must log in to the Nayms platform to withdraw the compensation received in cryptocurrency. For maximum security, claim funds can only be released from the fund pool of the segregated account to the user through a multi-signature scheme, where one set of private keys is submitted to Nayms's smart contract, Nayms's directors, insurance managers, or the sponsor, etc.

Governance

As the holder of the insurance license, Nayms maintains control of the segregated account. By signing legal agreements, certain rights and responsibilities of account management and other management are delegated to the sponsor or their representative. This authorization (and sub-authorization) is obtained in the terms and conditions of the Master Service Agreement (MSA). The sponsor's MSA includes a binding authorization agreement, which in turn includes underwriting guidelines. Brokers must join the Nayms platform to receive commissions, and brokers must also sign the Terms of Business Agreement (TOBA). They must also be brokers qualified to operate in Bermuda to enter the market.

Nayms strictly supervises the segregated accounts in accordance with SAC functional requirements, with particular importance placed on all segregated accounts maintaining sufficient capital to comply with Bermuda's solvency capital requirement (BSCR) framework. Nayms regularly reviews the solvency ratio of all accounts, with monitoring and reminders implemented by dedicated robots.

Tokens

Although Nayms is a centralized company, supervised by its board of directors and the Bermuda Monetary Authority, it integrates DeFi functionality into its platform through the NAYM token, combining cutting-edge scientific and technological innovation with compliance. The NAYM token is different from account ERC-20 tokens: account ERC-20 tokens can only be traded internally, while NAYM tokens can be listed and traded on external exchanges. NAYM is the utility token of the Nayms platform. Holders can share the market's positive performance through staking and participate in the governance of Nayms's fully delegated fund (NDF).

Nayms charges commissions on insurance business in the market. For example, a certain percentage of fees is charged for policy purchases and account ERC-20 token transactions, and the commission income includes various cryptocurrencies (such as wBTC, ETH, DAI, etc.). The commissions are deposited into the smart contract account, called the commission pool, from which they are regularly distributed to the following three aspects:

1/4 is sent to the Nayms staking contract, which is then converted to DAI. It is rewarded to users staking NAYM.
1/4 is sent to the Nayms Delegated Fund (NDF) to increase its reserves.
1/2 is sent as income to Nayms SAC Limited ("Nayms SAC"). Nayms SAC also receives income from onboarding fees and user licensing fees.

Nayms plans to issue 100 million NAYM tokens. The tokens will be distributed to various parties over time.

Like many other tokens, the circulation of NAYM will increase over time.

The schematic diagram of the circulation of NAYM tokens in the Nayms ecosystem is as follows:

Financing Information

On April 20, 2023, Nayms announced that it had completed a $12 million private placement financing at a valuation of $80 million, with UDHC leading the investment and New Form, Tokentus, and Keyrock participating. In addition to the $1.5 million pounds ($2 million) seed round financing in early 2021 (investors include XBTO, Coinbase Ventures, Maven11, and Insurtech Gateway), Nayms's total private placement financing reached $14 million. The Nayms insurance project's app has not been launched, and there is no public offering information for the NAYM token.

Team

Nayms was founded in 2020 and is headquartered in the UK. The Nayms team includes professionals in blockchain technology, insurance, capital markets, regulation, law, and business management, including 4 leaders, 18 team members, and 7 advisors. Nayms will use the new funds to expand its global team and accelerate the development of its native cryptocurrency insurance market.

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