Underwriters
Earn premiums and DeFi yield by backing on-chain insurance
TL;DR: Deposit capital into a syndicate, earn premiums from policies sold, and earn yield on idle funds. LayerCover currently uses a single managed syndicate model for underwriting.
LayerCover enables capital providers to earn returns by backing insurance policies. Your capital is deployed single-sided (USDC or wstETH) and earns from two sources simultaneously.
Dual Yield Sources
| Source | How | Typical Range |
|---|---|---|
| Premium Income | Your share of policy premiums from pools you back | Variable per pool |
| DeFi Yield | Idle capital deployed to Aave, Compound via whitelisted adapters | Market rate |
How Underwriting Works
Key Concepts at a Glance
| Concept | What It Means |
|---|---|
| Single-Sided Liquidity | Deposit one asset (USDC). No LP pairs, no impermanent loss. |
| Managed Syndicates | Underwriting happens through a syndicate vault managed by a designated Syndicate Manager. |
| Risk Points Budget | Each syndicate has a 20-point budget. Each pool consumes points based on rating and allocation size. |
| Leverage | Effective leverage starts at a configured max of 3x at launch, then steps down as the largest pool becomes more concentrated. |
| Capital Locking | Capital backing active policies is locked until those policies expire or settle. Unlocked capital can be withdrawn instantly. |
| Salvage Rights | If a claim is paid, you receive tokenized rights to the distressed assets. |
How Claims Affect You
When a policy pays out a claim:
- The syndicate that underwrote the policy is charged first
- If your vault wrote that business, claim losses reduce syndicate NAV
- The paying underwriters receive salvage rights over distressed assets when the pool uses salvage
- You cannot front-run claims because exposure is snapshotted at the incident / claim boundary
Next Steps
🏛️
Deposit
LPs deposit USDC into a syndicate vault and receive ERC-4626 shares.
🧭Manager Underwrites
The Syndicate Manager posts quotes, allocates capital just in time, and keeps the book inside the live leverage rules.
📈LPs Earn
Vault assets grow from policy premiums and yield earned on capital that is not currently locked by policies.