Fluctuating reinsurance protection

How do national insurance funds correct for the risk of catastrophic events, such as an earthquake that results in high casualties in a single location? They do this through reinsurance. Insurance companies engage reinsurance companies to insure the risk of the insurance company. Look at this as yet another layer of capital providers; the difference is, the reinsurers don’t provide the capital up front, they only provide it when the fund runs out of money. And unlike capital providers, there is no defined amount of capital that the reinsurer should provide, it just depends on the capital needs of the fund in a catastrophic event.

The reinsurance market has its own issues with regulations and it is unlikely that they will reinsure organizations as innovative as community tDAOs. Instead, the Takadao Reprotection Pool (rePool) will step in to fill this gap. The rePool is a pool of locked Takadao ecosystem tokens (TAKA) designed to act as a separate reserve fund for all tDAOs in case fund reserves are rapidly depleted due to a catastrophic event. More on this will be discussed in subsequent sections.

The rePool differs from reinsurance because it is a fluctuating pool that does not maintain a fixed capital amount. This is preferable in the context of tDAOs as the system of self-adjusting benefits already corrects for the absence of external capital, hence reprotection is only needed in extreme circumstances. While conventional reinsurance claims a fixed portion of the premiums, rePool shares in the tDAO’s surplus which fluctuates according to fund performance. This means that rePool reprotection costs are lower than conventional reinsurance costs; in turn, this maximizes member well-being and fund longevity.