DeFi insurance protocol InsurAce got a lot of criticism from the community when it suddenly cut the time people had to file insurance claims related to Terra.
InsurAce, a DeFi insurance protocol claims it was perfectly within its rights to reduce the claims period for people affected by the Terra USD (UST) debug event from 15 to seven days, but it also claims it has already processed nearly all 173 submitted claims and will pay out $11 million.
With a market capitalization of $15 million, InsurAce (INSUR) is the third-largest insurance provider for decentralized finance (DeFi) protocols.
Following the collapse of the Terra (LUNA) layer-1 blockchain, InsurAce caused a stir on May 13 when it announced it had shortened the claims window for those with cover related to Anchor (ANC), Mirror (MIR), and stablecoin Terra USD (UST).
However, CMO Dan Thomson said on Thursday that the company’s decision to shorten the claims window for the 234 Terra portfolio covers was necessary to avoid further losses, as UST had dropped to $0.08 by May 13, according to CoinGecko. He continued:
“It is in our terms of service to make such changes. We felt there was no point in delaying the process on behalf of those who lost money and stakers who would have to pay out claims.”
The move sparked debate in the crypto community, with some suspecting InsurAce was attempting to reduce the number of claims it would have to pay. On May 24, Terra Research Forum member FatMan told his 52,000 Twitter followers that InsurAce had made “a dirty move,” and that the company should not try to “weasel out” of its contract with clients.
However, Thomson stated that, aside from those rejected, the majority of the 173 claims submitted had already been processed and that the protocol was prepared to pay claimants approximately $11 million. He continued,
“We want the best for everyone here, but if this were traditional insurance, people would be stuck in litigation for months or years.”
Thomson also suggested that the protocol consider processing claims for the remaining 61 unfiled covers.
The collapse of Terra and UST has piqued the interest of regulators around the world, with the legendary South Korean financial crimes unit “Grim Reapers of Yeoui-do” resurrected to determine whether any crimes were committed by Kwon or the Luna Foundation Guard (LFG), which managed Terra’s funds.
Thomson stated that InsurAce may have legal recourse if the UST de-pegging was more than just a protocol failure. “I’m sure Terra and LFG have bigger fish to fry,” he said, “so that’s a bridge we’ll cross when we get to it.”
According to CoinGecko, INSUR is down 7.6 percent in the last 24 hours, trading at $0.28.
