Aggregate capital under the DAO structure is lower than under a traditional corporate insurer only if the incremental risk that contingent underwriting liabilities add to agents' private portfolios is small enough; the reduction is conditional, not automatic.
Source quote, verbatim
Thus, to reiterate the main point, if the incremental risk to the private portfolios of the agents from the contingent liabilities is small enough, the sum of the individual amounts of capital the DAO agents will hold will be less than the capital requirement for a traditional corporate entity.
From
Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019), V. MODEL, 4. Capital Requirements, p. 23 https://ssrn.com/abstract=3396542 · source PDF
Cite as
Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542
Holds when
all policies and agents identical
agent payouts independent and identically distributed and uncorrelated with private portfolios
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