Takadao Docs
Takadao Whitepaper v2 (tDAOs)
Takadao Whitepaper v2 (tDAOs)
  • Introduction
  • PART A. BACKGROUND
    • 01 - The Insurance Industry
      • Origins of insurance: Mutual protection and risk-sharing
      • The rise of the modern insurance industry
      • The insurance industry today
      • Key Consumer Complaints Against Insurance Companies
    • 02 - Introducing Takadao
      • Takadao: Addressing Consumer Complaints and Industry Challenges
      • Basics of the Blockchain
      • “Taka DAOs (tDAOs)” vs. Centralized Insurance Companies
  • PART B. TAKADAO: THE DAOs
    • 03 - Takadao Technology
      • The Takadao technology stack
      • tDAOs’ user journey
        • Risk assessment and KYC
        • Contribution
        • Membership Credits
        • Get a Payout
        • Redistribution of Surplus
        • Participate in Governance
    • 04 - Underwriting & Risk Management Algorithm
      • Introducing Dynamic Underwriting
        • Absence of capital providers
        • Fluctuating reinsurance protection
        • Using data in real time
      • Takadao dynamic underwriting: A closer look
      • Risk and the Benefit Multiplier (BM)
        • Individual risk and the Base Benefit Multiplier (B.BM)
        • Portfolio risk and the Benefit Multiplier Adjuster (BM.A)
      • Dynamic Underwriting Reserves
        • Calculating the Benefit Multiplier Adjuster (BM.A)
        • The Dynamic Reserve Ratio
        • How underwriting surpluses are calculated
    • 05 - tDAOs’ Tokens aka Membership Credits
      • Membership Credits
      • Make a contribution, receive Membership Credits, become a member
      • Membership agreement
      • Redeem/burn Credits, exit the DAO
      • Credits determine insurance benefit
      • Discontinuing membership before contract maturity
    • 06 - Benefits Payout Protocol
      • Decentralized Benefit Payout Management (DBPM) - A multistage process
        • Stage One - Document Review
          • Pre-verification
          • Manual Verification
          • Stage One Results
        • Stage Two - IRL Verification
          • Stage Two Results
        • Stage Three - Professional Review
  • PART C. TAKADAO: THE COMPANY
    • 09 - The Takadao Vision
      • Vision & Mission
      • Business Model
      • Shariah compliance
    • 10 - The Takadao Token (TAKA)
      • Token Utility
        • TAKA for Fees
        • TAKA for Staking - Reprotection Pool (rePool)
        • TAKA for Rewards
        • TAKA for Governance
      • Token Supply and Distribution
        • Token Supply
        • Token Allocation
        • Token Emissions Schedule
      • Value Accrual and Price Stability: Sources of Token Demand
        • Buy Back and Burn (BBB)
          • Schedule for BBB
          • Mechanism for BBB
        • rePool Staking
          • Benefits of rePool
          • Distribution of rePool yield
          • rePool Loan Support to tDAOs
          • tDAO to rePool Loan Repayment Modalities
        • Lock-up and Vesting Schedules
  • References
Powered by GitBook
On this page
  1. PART B. TAKADAO: THE DAOs
  2. 04 - Underwriting & Risk Management Algorithm
  3. Dynamic Underwriting Reserves

Calculating the Benefit Multiplier Adjuster (BM.A)

PreviousDynamic Underwriting ReservesNextThe Dynamic Reserve Ratio

Last updated 11 months ago

The algorithm has 3 methods to calculate the BM.A:

  • The Shortfall method. The model compares the current total benefit payouts made to the projected total of benefit payouts. This difference is the Shortfall. If the current total exceeds the projected total, it calculates the BM.A as: (Benefits Reserve + 70% of Fund Reserve – Shortfall) / (Benefits Reserve + 70% of Fund Reserve)

Shortfall

=

Current total benefit payouts

-

Projected total benefit payouts

  • The Loss Ratio (LR) method. The model compares the fund’s current loss ratio, defined as total costs over total revenue, and compares it to its pre-set loss ratio target. If the current LR exceeds the target LR, the BM.A is calculated as: 1 – (LR actual – LR target)

BM.A

=

1

-

Current LR

-

Target LR

  • The Cash Flow method. The Cash Flow method looks at current reserve levels, projected reserve levels, as well as recent and expected cash flows of the fund, when determining the amount of reserves available for claims payments. This is calculated as: (Actual Benefits Reserve + 70% of Fund Reserve + expected 12-month cash flow in through contributions) / (Expected Benefits Reserve if no claims were made + 70% of Fund Reserve + projected 12-month cash out flow through payouts).

Methods 1 and 3 take into account 70% of the Fund Reserve to spread out the impact of payouts. While the BM.A is used to protect the fund, changes to the BM.A should remain as small as possible to create transparency and fairness to the members. The fund can use any of these methods, or a combination, based on the model’s circumstances, whereby the model may change which method it uses based on the fund’s size, level of growth, and other characteristics.