Less than 2% of DeFi assets have insurance-like protection

Assets protected by insurance-like coverage account for less than 2% of the DeFi market’s roughly $100 billion in total value locked, according to Firelight Chief Strategy Officer Conor Sullivan. Sullivan identified the core problem in DeFi insurance as not simply a lack of coverage, but the absence of verifiable insurance. Traditional coverage often does not publicly disclose policy limits, terms, premiums, or backing capital, making it difficult for users to independently assess whether protection can actually be honored. Sullivan added the on-chain market is especially difficult to cover under traditional insurance models, as risks such as smart contract vulnerabilities, oracle manipulation, and failures in key and signature management change rapidly while multiple protocols remain interconnected. Against that backdrop, on-chain insurance, which allows collateral and coverage terms to be verified on the blockchain in real time, is emerging as an alternative. Firelight and others are working to build verifiable insurance infrastructure that can be integrated directly into DeFi protocols.