What if I told you we could reduce your coverage premiums by up to 30% while maintaining the same protection? That's what hedged coverage does. Let me explain how. 📈
The Problem with Traditional Coverage
Traditional parametric coverage requires 100% on-chain collateral. If you want $10,000 in coverage, we need to lock up $10,000+ in reserves. This capital inefficiency drives up premium costs.
But what if we could hedge that risk externally? Instead of holding 100% reserves, we could hold 80% on-chain and hedge the remaining 20% through external markets. This is exactly what hedged coverage does.
How Hedged Coverage Works
Tonsurance's hedged coverage uses a swing pricing model that combines on-chain collateral with external risk hedges. Here's the breakdown:
Capital Allocation (Example: $10M Coverage)
Three External Hedge Venues
We diversify risk across three complementary hedge venues:
1. Polymarket (40% allocation)
Prediction markets for crypto events. We buy YES shares on events like "USDT < $0.98 in Q1" to hedge depeg risk.
Advantages: Deep liquidity, instant settlement, transparent on-chain pricing
2. Binance Perpetuals (40% allocation)
Perpetual futures for inverse exposure. We short TON/USDT pairs to hedge against price drops.
Advantages: High leverage, funding rate opportunities, 24/7 liquidity
3. Allianz Parametric (20% allocation)
Traditional reinsurance for tail risk. Enterprise-grade parametric insurance from a Fortune 50 insurer.
Advantages: Regulatory backing, catastrophic risk coverage, institutional trust
Real Premium Comparison
Let's see how hedged coverage affects your premium for $10,000 USDT depeg protection over 30 days:
Traditional Coverage
Hedged Coverage ✨
How Claims Work
When a hedged policy triggers, here's what happens:
Immediate Payout (5 seconds)
You receive 100% payout instantly: 80% from on-chain reserves, 20% from temporary float.
Hedge Liquidation (30s - 5min)
Our keepers liquidate external hedge positions (Polymarket, Perpetuals, Allianz) in parallel.
Reserve Refill
Hedge proceeds refill the reserve vault. The 20% float is replenished automatically.
✓ You Never Wait for Hedges
Unlike traditional reinsurance (which can take weeks to settle), you get paid immediately. Hedge settlements happen in the background and don't delay your payout.
When Should You Choose Hedged Coverage?
Hedged coverage is ideal when:
- External hedge markets are liquid and fairly priced
- You want the lowest possible premium
- You're comfortable with our external hedge counterparties
- Market conditions favor hedging (low volatility, favorable funding rates)
Traditional coverage may be better when external hedges are expensive or unavailable (high volatility periods, illiquid markets).
Try Hedged Coverage Today
Chat with me to compare hedged vs. traditional pricing for your coverage needs!
Questions?
Want to learn more about how swing pricing works or see live hedge breakdowns? Feel free to reach out! 🤖
Ready to get lower premiums? Let's chat!
