Cover Pricing
How the mutual determines pricing for cover policies


Cover products are priced based on three main factors:
1. Value staked by Risk Assessors against the protocol or custodian.
2. Cover Amount selected by the user—the payout in case of a successful claim.
3. Cover Period selected by the user—the duration of the Cover.

Risk Cost

The first step is to calculate the Risk Cost based on the value staked. This reflects the expected annual outgo from the mutual of paying claims on the Cover.


  • net_staked_nxm = Amount of NXM staked - 50% x Pending Staking Withdrawals
  • staked_risk_cost_high = 100% (maximum risk cost)
  • staked_risk_cost_low = 2% (minimum risk cost)
  • low_risk_cost_limit = 50,000 NXM (amount of stake required to reach the low risk cost)


Risk_Cost = 1 - (net_staked_NXM / low_risk_cost_limit)^(1/7)
Subject to the following criteria:
  • Risk_Cost greater than or equal to staked_risk_cost_low
  • Risk_Cost less than or equal to staked_risk_cost_high

Cover Price

To come up with the final Cover Price, an allowance is made for the Cover Amount and Cover Period (selected by the user). Finally a Surplus Margin is added to enable (1) meeting costs (such as Risk Assessor rewards and Claims Assessor rewards), and (2) creating a surplus within the mutual as a result of writing covers.


  • cover_amount = cover amount selected by user (ETH or DAI)
  • cover_period = cover period selected by user (days) cover
  • surplus_margin = 30%


Cover_Price = Risk_Cost x ( 1 + surplus_margin) x cover_period / 365.25 x cover_amount