In-depth analysis of the regulated on-chain insurance project Nayms, which recently secured $12 million in funding

Author: 0x901e, veDAO Research Institute

Nayms is an insurtech company that introduces blockchain technology to make the insurance industry transparent and efficient, elevating risk pricing and insurance business management to a new level amidst the traditional insurance industry's opacity, slowness, and inefficiency.

Nayms is also the only company to simultaneously obtain licenses for crypto assets and commercial insurance, making it the world's first project to conduct fully regulated insurance business on-chain.

Nayms perfectly combines centralized oversight and accountability with the characteristics of decentralized finance (DeFi). Nayms' insurance business is fully regulated in Bermuda, the world's third-largest insurance jurisdiction, with oversight provided by the Bermuda Monetary Authority, a leading regulatory body at the forefront of technology.

Now, let veDAO lead you to explore Nayms' unique design and operational mechanisms in detail.

Segregated Account Company (SAC)

Nayms is registered in Bermuda as a Segregated Account Company (SAC), with the legal authority to issue segregated accounts, each owned by the investors of that account. Segregated accounts are defined in the relevant "legislation" as independent and distinct pools of assets and liabilities managed by the same entity.

In the Nayms marketplace, every underwriter with capital is essentially a segregated account, each with its unique business plan. The technical affairs and operational licenses of the segregated accounts are managed by Nayms' SAC.

Sponsors

Each segregated account is established at the request of a third party (referred to as the sponsor). Sponsors can create native crypto insurance businesses based on their expertise and understanding of crypto insurance. Sponsors must fill out various materials and a detailed business plan as required by Nayms to submit an application for creating an insurance business. The complete application is reviewed by Nayms for comprehensiveness, reasonableness, and alignment with internal benchmarks, ultimately deciding whether to approve or reject the application.

If a sponsor's application is approved, Nayms' SAC will open a segregated account in the sponsor's name, and the sponsor is responsible for implementing the insurance business plan and ensuring that the account is adequately capitalized and funds are prudently deployed. The sponsor should assist Nayms in managing the account, including conducting business, maintaining sufficient capital levels, preparing financial statements and regulatory documents, and facilitating audits. The sponsor is compensated through methods pre-agreed with Nayms.

Capital

Insurance companies must have sufficient capital before starting underwriting operations, as capital is the ultimate reserve for claims. The capital raising for Nayms' segregated accounts is conducted through token swaps, meaning each segregated account raises capital by selling ERC-20 tokens of the account. The price of the ERC-20 tokens to be sold (and issued) is set by the sponsor, and the price multiplied by the number of ERC-20 tokens to be sold should equal the required capital level of the segregated account.

The type and amount of capital in the segregated account are applied for by the sponsor and approved by Nayms. The capital can be in the form of wrapped Bitcoin, Ethereum, or stablecoins, among others. Fund providers provide capital equivalent to signing an agreement with Nayms, gaining economic benefits and other rights as per the terms and conditions of the agreement. The process of obtaining capital and managing it in the segregated account is recorded on the smart contract, which is publicly transparent, and anyone can verify it through a block explorer.

Each segregated account has its corresponding ERC-20 token, which is equivalent to an LP token, and its holders are the account owners entitled to receive investment returns. The sponsor is responsible for determining when the account has a surplus (defined as assets exceeding insurance liabilities) and submitting this to the SAC board at the appropriate time. If both parties agree to distribute the surplus, instructions are given to the controlling smart contract to execute the operation. The smart contract will proportionally distribute the surplus, valued in cryptocurrency, to the account owners—i.e., the holders of the account's ERC-20 tokens. The surplus amount accumulates from one distribution to the next until the user chooses to withdraw the funds.

The account's ERC-20 tokens can only be traded on Nayms' internal market and cannot be traded on external markets (as they need to be registered for transfer). In its internal market, account ERC-20 tokens are divided into primary and secondary markets, with tokens sold during the initial fundraising for the segregated account being the primary market, and the buying and selling of account ERC-20 tokens after the account has launched being the secondary market. Capital providers invest and trade based on their considerations of the sponsor's business plan and reputation. Secondary trades can be priced at par, discount, or premium, depending on the performance of the segregated account. According to Bermuda law, the details of the latest token holders are recorded in the account owner's company registry with each transaction. The registered online version is dynamically updated almost in real-time.

When a segregated account is ready for liquidation, whether because it has reached a predetermined maturity date or based on the sponsor's judgment or Nayms' instructions that the account has ceased operations, and all current and future liabilities have been settled, and all investments have been liquidated, a "reverse" token swap occurs. Nayms' smart contract is required to fully repurchase the segregated account's ERC-20 tokens from the capital providers in exchange for all available funds in that account. Once the liquidation process is initiated, subsequent operations occur automatically, and after liquidation, the registry of the account owners (ERC-20 token holders) will be cleared, and the account will be closed.

Underwriting and Claims

Once the segregated account has fully raised its capital, it can begin selling insurance. Insurance contracts can be set by underwriting experts, who can be the sponsors themselves or one of their representatives, who can access Nayms' online underwriting software or "Policy Builder." The Policy Builder is used to generate a detailed statement or declaration page for each insurance contract, including participant identities: designated insured parties, underwriters, brokers, and claims managers, as well as underwriting details: risk levels, total insurance limits, total premiums, payment cycles, and commission fees, among others. The Policy Builder also allows users to upload documents in PDF format. The statement and documents together constitute a complete insurance contract.

Any underwriter with the authority to underwrite a segregated account must comply with the underwriting guidelines of that account, which are formulated by Nayms based on the inputs from the sponsor in their application. Any part of the insurance contract that exceeds the underwriting guidelines must be submitted by the underwriter to Nayms for review to see if it can be approved. Before the final insurance contract is issued on the Policy Builder, Nayms will review the policy, with the review order depending on the underwriter's authorization level.

In the event of a claim, the claims processing procedure will submit a request to Nayms for confirmation. The insured must log into the Nayms platform to withdraw the compensation received, valued in cryptocurrency. To maximize security, the claims funds can only be released from the segregated account's fund pool to the user through a multi-signature scheme, where one set of private keys is submitted to Nayms' smart contract, Nayms' directors, insurance managers, or sponsors, etc.

Governance

As the holder of the insurance license, Nayms maintains control over the segregated accounts. By signing legal agreements, certain rights and responsibilities for account management and other governance are delegated to the sponsors or their representatives. This authorization (and sub-authorization) is obtained under the terms and conditions of the Master Service Agreement (MSA). The sponsor's MSA includes a binding authorization agreement, which contains the underwriting guidelines. Brokers must join Nayms' platform to receive commissions and must also sign the Terms of Business Agreement (TOBA). Additionally, brokers must be qualified to conduct business in Bermuda to enter the market.

Nayms strictly supervises the segregated accounts according to SAC functional requirements, particularly ensuring that all segregated accounts maintain sufficient capital to comply with Bermuda's Solvency Capital Requirement (BSCR) framework. Nayms will regularly review the solvency ratios of all accounts, with dedicated bots responsible for monitoring and alerts.

Tokens

Although Nayms is a centralized company, overseen by its board and the Bermuda Monetary Authority, it integrates DeFi functionality into its platform through the NAYM token, combining cutting-edge technological innovation with compliance. The NAYM token is different from the account ERC-20 tokens: account ERC-20 tokens can only be traded internally, while NAYM tokens can be listed and traded on external exchanges. NAYM is the utility token of the Nayms platform. Holders can share in the market's positive performance through staking and participate in the governance of the Nayms Delegated Fund (NDF).

Nayms charges commissions on insurance business in the market. For example, a certain percentage fee is charged for policy purchases and account ERC-20 token transactions, with the income commissions including various cryptocurrencies (such as wBTC, ETH, DAI, etc.). The commissions are deposited into an account in the smart contract, known as the commission pool, from which they are regularly distributed to the following three areas:

• 1/4 sent to Nayms' staking contract, which is then converted to DAI. Rewards are given to users staking NAYM.

• 1/4 sent to the Nayms Delegated Fund (NDF) to increase its reserves.

• 1/2 sent as revenue to Nayms SAC Limited ("Nayms SAC"). Nayms SAC also has income from onboarding fees and user licensing fees.

Nayms plans to issue 100 million NAYM tokens. The tokens will be distributed to various parties over time.

Like many other tokens, the circulation of NAYM will grow over time.

The circulation of NAYM tokens within the Nayms ecosystem is illustrated as follows:

Funding Information

On April 20, 2023, Nayms announced the completion of a $12 million private fundraising round at an $80 million valuation, led by UDHC, with participation from New Form, Tokentus, and Keyrock. In addition to the £1.5 million ($2 million) seed round financing in early 2021 (investors included XBTO, Coinbase Ventures, Maven11, and Insurtech Gateway), Nayms' total private fundraising scale has reached $14 million. The Nayms insurance project's app has not yet been launched, and there is no public offering information for the NAYM token.

Team

Nayms was founded in 2020 and is headquartered in the UK. The Nayms team includes professionals in blockchain technology, insurance, capital markets, regulation, law, and corporate management, comprising 4 leadership members, 18 team members, and 7 advisors. Nayms will use the new funding to expand its global team and accelerate the development of its crypto-native insurance market.

Related Links:

Official website: https://nayms.com/

Whitepaper: https://nayms.com/resources/

GitHub: https://github.com/nayms

Twitter: https://twitter.com/nayms

Discord: https://discord.com/invite/2qMGTtJtnW

Telegram: https://t.me/+kPKTWZ_9BXYzNGM0