Protocol for Defective Equipment Insurance InsurAce argues it was perfectly within its rights to limit the claims time for people affected by the Terra USD (UST) depeg event from 15 to seven days, but it also claims it has already processed nearly all 173 claims and will pay out $11 million.
With a market capitalization of $15 million, InsurAce (INSUR) is the third-largest insurance provider for DeFi protocols.
Following the collapse of the Terra (LUNA) layer-1 blockchain on May 13, InsurAce made a stir by announcing that it had shortened the claims window for individuals with cover for Anchor (ANC), Mirror (MIR), and stablecoin Terra USD (UST).
According to CoinGecko, UST has decreased to $0.08 by May 13 and CMO Dan Thomson claimed on Thursday that the company’s decision to reduce the claims window for the 234 Terra portfolio covers was necessary to avoid further losses. He continued by saying:
“Such changes are allowed under our terms of service. We didn’t see the value in extending the process for those who had lost money and stakers who would have to pay claims.”
The move sparked debate among crypto enthusiasts, with some speculating that InsurAce was attempting to decrease the number of claims it would have to pay. On May 24, Terra Research Forum member FatMan advised his 52,000 Twitter followers that InsurAce had undertaken a “dirty manoeuvre” and that the company should not try to “weasel out” of its customer agreements.
However, aside from those rejected, Thomson stated that the majority of the 173 claims submitted had already been reviewed and that the protocol was prepared to pay claimants approximately $11 million. Adding to it:
“While we want the best for everyone here, if this were standard insurance, folks would be locked in court for months or years.”
InsurAce may have legal recourse
Thomson also advised that the procedure consider processing claims for the remaining 61 unfiled covers.
The collapse of Terra and UST drew the attention of regulators around the world, with the “Grim Reapers of Yeoui-do,” a notorious South Korean financial crimes unit, reactivated to see if Kwon or the Luna Foundation Guard (LFG), which controlled Terra’s finances, had committed any crimes.
Thomson pointed out that InsurAce may have legal recourse if the UST de-pegging was not simply a protocol failure. “I’m sure Terra and LFG have better fish to fry,” he added, adding, “so that’s a bridge we’ll cross when we get there.”
According to CoinGecko, INSUR has been down 7.6% in the last 24 hours to $0.28.