Major Insurers Take the Plunge to Underwrite Risk in the Crypto Space
Big-name insurers such as AIG, Allianz, Chubb, and XL Group are increasingly tailoring coverage options to protect businesses in the crypto space, Bloomberg reports July 19.
Aon, a major insurance broker that claims to occupy 50 percent of the crypto-insurance market, told Bloomberg the firm is seeing more crypto-specific protections catering to the new industry.
Another broker, Marsh & McLennan, said that 2018 has been “brisk” for crypto-insurers, revealing that Marsh has now formed its first-ever team dedicated to broker policies for blockchain startups.
Bloomberg’s sources say that premiums for crypto-related firms can tally to over fivefold the average coverage costs of a traditional corporate insurance policy, sometimes as high as 5 percent of coverage limits annually. Policies may require “as many as a dozen underwriters” to chip in $5-15 million of protection apiece.
These are high premiums for what are perceived to be high risks, arguably brought into focus at the very beginning of this year with the unprecedented theft of $532 million worth of crypto from Japanese exchange Coincheck.
The big insurers appear reluctant to reveal the extent of the coverage they offer. Bloomberg cites a statement from Chubb that said that the firm will not underwrite insurance for crypto exchanges or wallets. XL also hedged on specifics, saying only that it is “being careful when looking at those risks and analyzing them on a case by case basis.”
While declining to disclose the sum of crypto-related premiums it has taken in so far, American International Group confirmed that the company met with crypto custodians and trading platforms about protection.
Allianz’s Christian Weishuber went on record saying that he thinks “insurance for cryptocurrency storage will be a big opportunity...digital assets are becoming more relevant, important and prevalent...and we are exploring product and coverage options in this area.” Allianz has reportedly begun offering individual coverage for crypto theft in the past year.
Among major crypto industry players, U.S. exchange and wallet service Coinbase reportedly insures funds that are stored in hot wallets — which represent up to 2 percent of customers’ assets — but does not disclose how far its coverage extends.
Notably, the very technology that underlies cryptocurrencies, blockchain, is increasingly being considered as a solution to innovate the insurance industry itself, with Marsh recently partnering with IBM on its first commercial blockchain solution for proofs of insurance.