Distribution Models

Overview

Cliff Horizon has three options for how parametric weather derivatives reach end clients. Each model involves different counterparty structures, regulatory implications, and margin profiles. The models are not mutually exclusive — they represent an evolution from lighter to heavier commercial commitment.

Model A — Client Buys Direct from Ensuro

The client connects a crypto wallet, pays the USDC premium, and the Ensuro smart contract issues the policy directly. Cliff Horizon acts as pricing engine and interface only — it never touches money.

Advantages:

Zero counterparty risk for Cliff Horizon
Zero capital requirement
Cleanest regulatory position — Cliff Horizon provides analytics, not financial products

Disadvantages:

Requires B2B clients (construction project managers, solar operators, utility hedgers) to hold crypto wallets and acquire USDC — a massive friction barrier for institutional buyers
Cliff Horizon may still be classified as a distributor of derivative/insurance products even without being the counterparty

Verdict: Deprioritised. Unnecessary friction when Models B and C are both viable under Singapore law.

Model B — Cliff Horizon as Counterparty

The client buys from Cliff Horizon via normal fiat invoice and standard commercial terms. Cliff Horizon lays off the risk to Ensuro back-to-back.

Advantages:

Cleanest client experience — the client never sees blockchain infrastructure
Full control of client relationship
Higher margin — spread between client premium and Ensuro back-to-back cost

Disadvantages:

Cliff Horizon is issuing what is functionally a derivative
Requires capitalisation to support back-to-back timing mismatches

Regulatory position: MAS has confirmed that weather derivatives fall outside SFA regulation (Product Definitions FAQ Q7/A7). No CMS licence or FAA licence is required to deal in weather derivatives from Singapore. Model B is viable without a licensing barrier — a structural advantage of Singapore domicile.

Verdict: Stage 4 end-state. Higher margin, full client control, but requires capital base to support.

Model C — Cliff Horizon as Introducing Agent (Recommended)

Cliff Horizon provides analytics, prices risk, and presents the derivative on the dashboard. When the client wants to buy, the contract is between the client and Ensuro (or an Ensuro-fronted fiat entity). Cliff Horizon acts as introducing agent — it arranges the transaction but is not the counterparty.

Advantages:

Fiat payment handled by Ensuro's front-end entity; blockchain settlement invisible to client
Cliff Horizon earns commission on each policy (already built into Ensuro's premium decomposition as partnerCommission)
Lightest regulatory burden — intermediary licence requirements are lighter than full CMS or insurance licensing, and may qualify for exemption under Singapore law
No counterparty risk, no capital requirement beyond operating costs

Disadvantages:

Lower margin than Model B
Dependent on Ensuro's ability to front a fiat-denominated entity for client-facing transactions

Verdict: Recommended for Stage 3. Fastest to market, lightest regulatory burden, and Ensuro provides counterparty capital. The dashboard architecture supports all three models — the "Buy Cover" flow is identical from the client's perspective regardless of counterparty structure.

Evolution Path

Stage 2 — Warranted Analytics
  Tier 2 warranty is underwritten by Ensuro via Risk Module
  Cliff Horizon earns analytics fee + risk partner commission
  No direct derivative distribution yet

Stage 3 — Parametric Derivatives (Model C)
  Cliff Horizon as introducing agent
  Ensuro as counterparty and capital provider
  Commission-based revenue on each policy

Stage 4 — Own Book (Model B)
  Cliff Horizon as direct counterparty
  Ensuro as reinsurance backstop
  Spread-based revenue, higher margin
  Requires capital base and regulatory comfort

Each stage funds and de-risks the next. Model C generates revenue from risk partner commission with zero balance sheet exposure. Model B captures full margin once scale justifies capitalisation.

Dashboard Integration

The dashboard supports all three distribution models without architectural changes. From the client's perspective, the flow is:

View calibrated probability and risk score on the Forecast tab
Explore scenarios on the Scenario Simulator
Review derivative structures and pricing on the Derivatives tab
Select "Buy Cover" — at which point the counterparty structure (Model A, B, or C) determines the back-end settlement path

The front-end experience is identical. Only the legal counterparty and payment rails differ.