Introducing Covered Vaults: the first primitive for vault-native risk transfer

Vault risk transfer is one of the hardest problems at the intersection of DeFi and insurance. Yesterday at @Vault__Summit, we outlined the challenges of vault-native risk transfer and why it is key to unlocking the next $100B in DeFi.

Today, we are introducing Covered Vaults, the first primitive to deliver vault-native risk transfer at scale.

Built in close collaboration with @NexusMutual, together with 15 design and launch partners, including @Morpho, @Kiln_finance, and @Symbiotic, the new primitive brings multiple breakthroughs to DeFi risk transfer.

DeFi insurance is hard, vault-native risk transfer is harder.

Conceptually, vault-native risk transfer is deceptively simple: offer depositors the option to cover a vault position against technical and economic loss events in exchange for a premium proportional to the coverage duration.

In practice, this requires solving multiple technical and actuarial challenges across the risk-transfer lifecycle. These include vault-specific risk assessment and pricing, sourcing capital willing to underwrite the very tail risks everyone else is looking to transfer, and providing onchain composable protection with no duration commitment or prepayment.

Building a primitive capable of solving these challenges at an institutional grade, with eight, nine, or ten-figure protection capacity per vault, remained uncharted territory. Until now.

Enter Covered Vaults

Covered Vaults lay the groundwork for vault-native risk transfer at scale, starting with up to $50M in cover capacity per vault, increasing further this year through restaking capital.

Based on an extended ERC-7540 standard, the new primitive specifically implements the following core vault-native principles:

DeFi-composable. Covered Vaults are designed to *augment *existing vaults, infrastructure, and interfaces, not replace them. The primary point of deposit remains the same. For instance, if a user is looking to cover a Morpho vault, they would still deposit into the vault and then simply stake the vault shares in the Covered Vault to activate protection.

Commitment-free. No prepayment, no fixed terms, no manual renewal tracking to match or exceed the flexibility of the actual vault position. The user is free to toggle cover on or off at will. Premiums are fixed at a yearly rate and streamed from the yield while coverage is active.

Real-time onchain underwriting. Powered by Nexus Mutual's underwriting infrastructure and policy framework, battle-tested across billions in coverage and millions in payouts. Underwriting capital is locked onchain, in real time, to back the value staked in Covered Vaults on demand, with a fully auditable, binding history and verifiable solvency.

ERC-4626 and beyond. The primitive supports any standard tokenized vault and can also be extended to support non-standard vault implementations.

Take control of your tail risk

Covered Vaults are the culmination of nearly a year of work to move vault risk management from accept-and-hope to a model that institutions, asset managers, fintechs, vault providers, and individuals can confidently control.

To try the primitive firsthand, visit opencover.com/vaults to access the production reference UI.

If you are looking to integrate vault risk transfer natively into your products, allocations, or workflows, reach out directly or through one of the Covered Vaults design and launch partners you already work with.

Covered Vaults design and launch partners

Underwriting and infrastructure

• Nexus Mutual (@NexusMutual)

• Morpho (@Morpho)

• Kiln (@Kiln_finance)

• **Utila **(@utila_io)

• Symbiotic (@symbioticfi)

• Lifi (@lifiprotocol)

• Merkl (@merkl_xyz)

Vaults and ecosystem

• Base (@base)

• Optimism (@Optimism)

• Vaults FYI (@vaultsfyi)

• YO (@yield)

• **Origin **(@OriginProtocol

• Picnic (@usePicnic)

• RebelFi (@rebelfi_io)

• **Superform **(@suerformxyz)

• **AUTOfinance **(@autopools)