REF: APPENDIX_B // ACTUARIAL_GUIDANCE
ACTUARIAL GUIDANCE
Minnesota Department of Commerce Guidance Note: 2026-01
Authority: Minn. Stat. § 325M.05, Subd. 5; § 325M.06, Subd. 3
THE SOLVENCY FORMULA
MCR = max(B_floor, Σ(V_i × W_i × λ_rev) + K_tail)
Standard: $50,000 / Seed Tier: $10,000
Volume of active credentials in Class i
Risk Weight for Credential Class i
Revocation Latency Multiplier
Tail Risk Add-on (quadratic surge pricing)
RISK WEIGHTS (W_i)
| CLASS | TYPE | DESCRIPTION | WEIGHT |
|---|---|---|---|
| A | Low-Risk Access | Gym, library, age verification | $0.50 |
| B | Standard Attribute | Licenses, employment, degrees | $50.00 |
| C | High-Stakes | Professional licensure, financial authority | $5,000.00 |
| D-1 | Agentic (non-fiscal) | AI posting content, non-financial decisions | $250.00 |
| D-1 Seed | Agentic (Seed Tier) | MN resident startups, up to 1,000 credentials | $10.00 |
| D-2 | Agentic (fiscal) | AI signing transactions, high-velocity fiscal | $5,000.00 |
Note: Class D-2 = Class C. "If you give a bot a wallet, you bond it like a banker."
REVOCATION FACTOR (λ_rev)
λ_rev = 1.00
λ_rev = 0.70
Discount applies if: (1) every presentation is checked against a live status endpoint, and (2) revocations propagate within 60 seconds of emergency suspension.
LIQUIDITY BUFFER REQUIREMENT (K_tail)
Tail-risk capital buffer for high-velocity systems. If velocity > 1,000 tx/hour:
K_tail = $1.00 × ((v - 1,000)² / 100)
• At 10,000 tx/hour: K_tail = $810,000
• Hard limit: 100,000 tx/hour → automatic suspension
This isn't a fine—it's a capital buffer. The curve stays flat for normal operations but goes vertical for runaway loops, creating an economic constraint that prevents flash crash dynamics.
ACCEPTABLE COLLATERAL
| TIER | ASSET | RECOGNIZED VALUE |
|---|---|---|
| 1 | USD Cash, T-Bills (<1yr) | 100% |
| 2 | AA+ Corp Bonds, Munis | 90% |
| 3 | S&P 500 Equities, Gold | 70% |
| 4 | BTC, ETH only | 50% |
| 5 | Governance tokens, NFTs | 0% |
SEED TIER (MN STARTUPS)
$10,000
vs. $50,000 standard
1,000
active Seed Tier credentials
$10.00
per D-1 Seed credential
Eligibility: Minnesota Resident Controllers only. Upon exceeding the cap, must comply with Standard Floor.
ASSOCIATION COVERAGE OF LAST RESORT
Illustrative Pricing
Premium = (MCR × 0.05) + AdminFee
Self-supporting pricing discourages adverse selection. Industry-funded—no state appropriation.
Trigger Events
- • Acknowledged breach
- • Administrative finding (preponderance standard)
- • Insolvency default
PAY FIRST, SUE LATER
Surety pays to Consumer Restitution Fund within 14 days of administrative finding. Litigation happens over the Association's money, not the victim's.