An insurance pool's total funds may look large, but the coverage you can actually buy for a specific protocol is still low. The core reason is the money in the pool isn't all allocated to that protocol, and the NXM staked on it must be converted according to rules—not 1:1 into coverage.
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This "purchasable limit" is called Capacity in Nexus Mutual, and here's how it's calculated:
Funds Aren't All Bet on One Protocol
The assets in the entire pool are owned by all NXM holders. But these funds aren't bet on just one protocol. Instead, individual "staking pool managers" decide how to allocate staked NXM to protocols they're willing to cover. The "total funds" you see is a sum, and after splitting it across protocols, each gets only a portion.
1 Staked NXM Counts for 2 NXM Worth of Coverage
When calculating Capacity, staked NXM isn't 1:1. The protocol has a Global Capacity Factor, currently set to 2. This means for every 1 NXM staked, the corresponding Capacity is the value of 2 NXM. This factor directly makes the purchasable limit lower than the staked amount.
Buying a Policy Locks Up Capacity
Whenever someone buys a policy, the protocol reserves the corresponding Capacity from the relevant staking pool. That capacity is locked for as long as the policy lasts, only released when the policy expires. For popular protocols, most of the capacity may already be taken by previous buyers.
Claims Directly Burn Staked NXM
When a claim is paid, the protocol burns a portion of the staked NXM from the relevant pool to cover the payout. Once burned, that capacity is gone forever, permanently reducing the pool's Capacity.
There's also the MCR (Minimum Capital Requirement) bottom line. If the active coverage of a protocol approaches 20% of the total pool size, Nexus Mutual's Advisory Board can raise its Capacity Reduction Factor, instantly shrinking or even zeroing out the remaining buyable amount. No matter how large the total pool looks, it can't be enough to cover extreme risks.
Common Misconception
Many people think the "total coverage" they see on the interface is what they can buy right now. In reality, that's the sum of all staking pools' Capacity for that protocol. The "Available Capacity" you see after logging in is a completely different number—that's the amount you can actually purchase at the moment.
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Practical Tips
Go to the official Nexus Mutual app, find the protocol you want, and check the specific Available Capacity number, not the total pool or total coverage. If you need a large policy, consider buying in batches over a few days, waiting for earlier policies to expire and free up capacity.
