While the cryptocurrency space has been growing by leaps and bounds, many insiders point to one sector in particular that is growing at a ‘fast pace’, cryptocurrency insurance. In fact, the crypto insurance sector won’t talk about it at all. Many industry giants want to get in on crypto insurance, most decline to comment about the industry itself, say insiders.
“It’s understandable why big names like AIG, Chubb and XL Group haven’t provided too many specifics. On its face, providing coverage to crypto startups might seem borderline absurd. It’s an industry with a well-deserved reputation for being like the Wild West — an unregulated digital frontier where frauds and heists are rife (recall the hacks of Mt. Gox, and more recently, Bitfinex and Coincheck) and get-rich-quick schemes abound.”, Bloomberg reports.
In short, people in the cryptocurrency space want to get rich. FAST. And as a safety net, are willing to pay insurance premiums to ensure their funds are safe.
And big insurance names like AIG, Chubb, XL Group and Aon (who has cornered around 50% of the crypto insurance industry) are taking advantage, with reports saying they are betting the substantial premiums of protecting digital assets may outweigh the potential costs. By capitalizing on the crypto industry’s arguably undeserved ‘bad reputation,’ underwriters are reportedly charging businesses FIVE TIMES more and beyond for coverage.
Crypto-related business in particular are asking for coverage. But beyond then, why the hush-hush on crypto insurance policies? Basically, it all revolves around risk assessment and bad reputation. XL said it is “being careful when looking at those risks and analyzing them on a case by case basis,” as reported by Bloomberg. Insurance companies are also concerned their policies might be overstated by their crypto-industry clients, hence want to keep individual policies confidential.
BitGo, a cryptocurrency services provider, met with roughly 75 insurers during a May trip that included stopovers in New York, London and Bermuda. Back in 2015, the company became one of the first to get crypto insurance, only to drop coverage a year later because of the expense, says Chief Executive Officer Mike Belshe. In fact, the report says that crypto startups have seen insurance as a “necessity” these days, given the unstable status of the cryptocurrency markets.
Still, many of the coverage amounts fall short of its assets under coverage, meaning, most insurance companies only insure part of the assets. Coinbase for example, only has parts of its assets insured.
Still, most details of these are confidential and kept within insiders.
One things for sure though, the crypto insurance industry are “crypto believers”.