Credit & Underwriting

Not every tool invocation is paid upfront. chio's credit system allows agents with established reputation and proper certification to operate on credit, backed by underwriting decisions, collateral bonds, and a full capital accounting ledger. This guide covers the end-to-end credit lifecycle from facility creation through bonded execution to liability markets. The CLI surface includes chio trust facility issue, chio trust bond issue, chio trust bond simulate, chio trust underwriting-decision evaluate, and chio trust underwriting-decision issue.

Credit Facilities

A credit facility is a pre-approved line of credit granted to an agent or operator. Facilities are generated by the underwriting system based on the applicant's reputation score, certifications, and runtime assurance level. Terms are captured in CreditFacilityTerms:

pub struct CreditFacilityTerms {
    pub credit_limit: Money,
    pub utilization_ceiling_bps: u32,       // max % of limit usable at once
    pub reserve_ratio_bps: u32,             // collateral reserve requirement
    pub concentration_cap_bps: u32,         // max exposure to single provider
    pub ttl_seconds: u64,                   // facility lifetime
    pub capital_source: CapitalSource,      // where backing capital comes from
}

When an agent applies for credit, the underwriting system evaluates the application and returns one of three dispositions:

• Denied: the application does not meet minimum underwriting criteria.
• ManualReview: the application is borderline and requires human review before a facility can be granted.
• FacilityGranted: a credit facility is created with the terms specified by the underwriting decision.

Credit Bonds

A credit bond is the collateral backing for an active credit facility. Bonds lock capital that can be seized if the agent defaults on its obligations.

pub struct CreditBondTerms {
    pub facility_id: String,
    pub credit_limit: Money,
    pub collateral_amount: Money,
    pub reserve_requirement_amount: Money,
    pub outstanding_exposure_amount: Money,
    pub reserve_ratio_bps: u32,
    pub coverage_ratio_bps: u32,
}

Bonds pass through a lifecycle of states:

Bond disposition actions control transitions between states:

• Lock: lock additional collateral into the bond
• Hold: place a hold on bond collateral pending investigation
• Release: release collateral back to the bond holder
• Impair: seize collateral due to default or violation

Underwriting Decisions

The underwriting system evaluates credit applications using a combination of reputation history, certification status, and risk classification. Every decision is recorded with full reasoning for auditability.

Risk Classification

Each applicant is assigned a risk classification that determines the scrutiny applied to their credit application:

Decision Outcomes

After risk classification, the underwriter produces one of four decision outcomes:

• Approve: grant the requested facility with computed terms
• ReduceCeiling: approve with a lower utilization ceiling than requested
• StepUp: require additional collateral or certification before approval
• Deny: reject the application with reason codes

Decision Policy Defaults

The default underwriting policy uses these thresholds:

Reason Codes

When a decision is not a clean approval, the underwriter attaches reason codes explaining why. There are 13 defined reason codes:

pub enum UnderwritingReasonCode {
    ProbationaryHistory,           // insufficient operational history
    LowReputation,                 // composite reputation below threshold
    ImportedTrustDependency,       // reliance on external trust source
    MissingCertification,          // required cert not present
    FailedCertification,           // certification check failed
    RevokedCertification,          // certification was revoked
    MissingRuntimeAssurance,       // no runtime assurance attestation
    WeakRuntimeAssurance,          // assurance tier below minimum
    PendingSettlementExposure,     // unsettled financial exposure
    FailedSettlementExposure,      // prior settlement failure
    MeteredBillingMismatch,        // billing discrepancy detected
    DelegatedCallChain,            // delegation chain risk factor
    SharedEvidenceProofRequired,   // additional proof needed
}

Bonded Execution

Bonded execution is the mechanism that allows autonomous agents to operate independently while providing economic guarantees to counterparties. The level of autonomy an agent has is governed by its autonomy tier and control policy.

Autonomy Tiers

Control Policy

Every bonded agent has a control policy that constrains its autonomy:

pub struct AgentControlPolicy {
    pub kill_switch: bool,                     // immediately halt all agent activity
    pub maximum_autonomy_tier: AutonomyTier,   // highest tier this agent can reach
    pub require_locked_reserve: bool,          // must have active bond before operating
}

The kill_switch is an emergency stop that immediately halts all agent activity regardless of bonds or approvals. When require_locked_reserve is set, the agent cannot execute any tool invocations unless it has an active bond with sufficient collateral.

Execution Decisions

When a bonded agent requests a tool invocation, the system evaluates the request against the agent's bond, control policy, and current exposure to produce an execution decision:

• Approved: invocation proceeds immediately against the agent's bond
• RequiresBond: agent must post additional collateral before the invocation can proceed
• Denied: invocation rejected due to kill switch, insufficient bond, or policy violation

Capital Book

The capital book is the ledger of all capital movements within the credit system. Every event (Commit, Hold, Draw, Disburse, Release, Repay, Impair) is recorded.

Event Kinds

Capital Roles

Each capital movement involves a counterparty with a defined role:

• OperatorTreasury: the operator's own capital pool, used for self-funded facilities
• ExternalCapitalProvider: third-party capital provider who funds facilities for a return
• AgentCounterparty: the agent or entity on the other side of the capital movement

Execution instructions for capital movements can require multi-sig authority chains, ensuring that high-value disbursals or impairments require approval from multiple authorized parties.

Liability Market

The liability market provides insurance-like coverage for tool execution risks. Providers underwrite specific risk classes and agents can purchase coverage to protect against operational failures.

Provider Types

Coverage Classes

Coverage is organized into five classes, each addressing a different risk category:

• ToolExecution: covers losses from tool invocation failures or incorrect results
• DataBreach: covers costs arising from unauthorized data exposure during tool use
• FinancialLoss: covers direct financial losses from agent actions
• ProfessionalLiability: covers claims from errors in professional-grade agent outputs
• RegulatoryResponse: covers costs of regulatory investigations or compliance actions

Coverage Lifecycle

Coverage follows a standard insurance lifecycle:

Quote -> Bind -> [Active Coverage Period] -> Claim -> Adjudication -> Payout

• Quote: provider prices the coverage based on the agent's risk profile and requested class
• Bind: agent accepts the quote, premium is collected, coverage begins
• Claim: agent or operator files a claim against the coverage after a covered event
• Adjudication: provider evaluates the claim against receipts and policy terms
• Payout: approved claims are settled through the standard settlement rails

Open Market

The open market uses economic bonds to incentivize honest participation in the chio ecosystem. Participants post bonds that can be slashed if they violate market rules.

Bond Classes

Penalty Actions

When a market rule is violated, the system can apply penalty actions against the violator's bond:

• HoldBond: freeze the bond pending investigation. Capital cannot be withdrawn but is not yet seized.
• SlashBond: seize part or all of the bond as a penalty. Slashed capital is distributed to the affected counterparty.
• ReverseSlash: reverse a previous slash if the original decision is overturned on appeal.

Summary

Next Steps

• Settlement · how settled capital actually moves across rails
• CLI Reference · commands for managing facilities, bonds, and underwriting
• Agent Passport · the reputation system that feeds underwriting decisions