To Top

Insurance Companies Take Leap of Faith By Going the Cryptocurrency Route

A number of major insurance companies like AIG, Chubb and XL Group have begun offering the revolutionary new cryptocurrency insurance in a bid to embrace blockchain technology.

Notably, most of the companies involved in this new practice have gone on record to say that they have not publicized their activities. They, however, maintained that they are able to avoid liabilities.

As Bloomberg highlighted, about a dozen underwriters currently offer cryptocurrency services. Surprisingly, most of the insurance agencies declined to leave a comment when contacted by reporters

A handful of crypto startups have embraced cryptocurrency insurance in order to shield themselves from crime and the legal implications of actions undertaken by their board members and high ranking executives.

The director of technology at Digital Asset Research, Lucas Nuzzi, noted that insurance is absolutely necessary for emergent cryptocurrencies since such cover tends to ease the workload of companies when it comes to collaborating with banks.

Expensive Premiums

The only caveat with the new cryptocurrency cover is that the premiums don’t come cheap. Numerous underwriters have gone as far as charging 5 times the standard rate businesses would cough up in order to shield themselves from theft and loss.

In the new set up, crypto startups are liable to pay about 5% of their coverage limits yearly. According to sources, companies that desire extended coverage need to have as many as 12 underwriters where each offer about $5-15 million in coverage fees.

The CEO of BitGo, Mike Belshe, mentioned that their company convened with 75 insurers earlier in the year to get back on the bandwagon after they canceled their coverage in 2016 due to issues with monetary feasibility. Prior to that, the company was among the pacesetters in the industry when it came to pursuing cryptocurrency insurance in 2015.

Opportunities Abound

An Allianz representative, Christian Weishuber, was quoted for saying that cryptocurrency storage insurance was a massive opportunity for businesses. Allianz has dabbled in the industry by offering a number of coverage options for cryptocurrency theft. Weishuber pointed out that technology development has promoted digital assets to be considered as valuable in the real economy.

Other insurance brokers like Marsh & McLennan and AON have also highlighted the innumerable benefits of cryptocurrency insurance. In the last year, both companies revealed that they had made major gains despite the fact that the initial setup price was a bit too dear for new companies to establish themselves.

Remarkably, none of the insurers in the industry have paid claims for losses despite the numerous reports filed about hacks and thefts

In particular, Marsh & McLennan formulated a team constituting 10 people in order to handle blockchain startups. AON managed to streamline their typical insurance policy to ease the underwriting process.

Without naming names, a reputable brokerage source has come to the fore and revealed that about half of the companies in the cryptocurrency insurance game have made modifications to their policies in order to facilitate cryptocurrency cover.

Different Gravy

The fact that many companies are involved in the cryptocurrency industry means that the coverage varies from one company to the next. AIG revealed that after holding successive meeting sessions with a number of cryptocurrency trading platforms, they decided to incorporate crypto coverage as part and parcel of their normal operations. They, however, failed to reveal just how much business they have transacted in the sector.

XL mentioned that they had undertaken a risk-free approach to oversee possible risks. They shared that their analysis was based on an individual case basis, without necessarily sharing the fine details. Chub said that it was never their intention to cover crypto wallets and the exchanges involved.

They also failed to delve into the specifics about the nature of the crypto businesses they cover.In London, Lloyd notified their agents with specific instructions about the need to exercise caution when it comes to handling cryptocurrencies.

Coinbase is said to have a coverage for a huge chunk of their cryptocurrency holdings. The cover includes monies stashed in hot wallets. The company has however failed to disclose the exact figures stored in their deports and offline storage accounts due to security.

More in Insurance

Leave a Reply

Your email address will not be published. Required fields are marked *