Craig Calcaterra

Department of Mathematics, Metropolitan State University

Wulf A. Kaal

University of St. Thomas, Minnesota – School of Law

Vadhindran K. Rao

Metropolitan State University


Insurance products can be optimized with emerging decentralized technology. We propose the use of cryptocurrencies as claims on future cash flows of an underwriting business operated by a Decentralized Autonomous Organization (DAO). The design of our DAO allows for decentralized collaboration (i) among DAO underwriters as well as (ii) between underwriters and consumers. In this decentralized system, the tokens essentially substitute for reputation. Financial distress or bankruptcy of an individual underwriter does not have to affect either customers or the DAO as the insurance contracts are backed by encumbered tokens. The structure of incentives embedded in the design has the potential to lower capital requirements and the related need for capital regulation.

Keywords: Insurance, Underwriting, Finance, Token Models, Cryptocurrencies, Feedback Effects, Emerging Technology, Tokens, Blockchain, Distributed Ledger Technology, Mathematics, Model

JEL Classification: K20, K23, K32, L43, L5, O31, O32

Calcaterra, Craig and Kaal, Wulf A. and Rao, Vadhindran K., Decentralized Underwriting (May 30, 2019). Available at SSRN:

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