A growing number of big-name insurers are getting into the crypto space. They are exploring new product options in this area and meeting with cryptocurrency custodians and trading platforms about coverage. However, exclusions can add up fast for crypto businesses and premiums can be more than five times that of a normal business.
Large Insurers Getting into Crypto
While most big-name insurers are reluctant to provide coverage to crypto startups, some are slowly coming around and quietly entering the space. Two leading insurance brokers that help companies shop for crypto policies, Marsh & Mclennan and Aon, were quoted by Bloomberg on Thursday:
Business has been brisk this year.
Marsh has formed a dedicated team to service blockchain startups while Aon says it has “seen some insurers tweak general company policies to include crypto-specific protections,” the publication detailed, adding that Aon also claims to have over 50 percent of the crypto insurance market.
According to the company’s website, “Aon has been working to understand these evolving technologies and actively collaborates with the insurance marketplace to develop innovative risk transfer solutions.” Its subsidiary, Aon Risk Solutions, has “developed a policy form to protect against the loss of cryptocurrency along with other initiatives designed to meet the emerging risks posed by cryptocurrencies and digital ledger technologies,” Business Insurance magazine described.
European insurer and asset manager, Allianz SE, has 88 million retail and corporate clients in more than 70 countries. The Munich-based company “began offering individual coverage for digital-coin theft in the past year,” the publication conveyed and quoted the company’s spokesman, Christian Weishuber, saying:
Insurance for cryptocurrency storage will be a big opportunity…Digital assets are becoming more relevant, important and prevalent on the real economy and we are exploring product and coverage options in this area.
American International Group (AIG) “has also been adding crypto coverage into standard policy forms” and has “met with cryptocurrency custodians and trading platforms about coverage,” the news outlet detailed and quoted a source familiar with the matter:
Over a dozen underwriters, including Chubb and XL, currently provide coverage to crypto-related businesses.
In February, Reuters reported that XL Catlin, Chubb, and Mitsui Sumitomo Insurance firms started offering protection against crypto theft.
Crypto companies are also increasingly seeking to obtain insurance coverage to help attract more clients. A London-based startup focused on crypto custody services, Trustology, is one of the businesses in talks to obtain coverage, according to Bloomberg. The company wants to insure its customer accounts for up to £85,000 (~US$111,630), which is the same standard as a U.K. bank account.
However, insurance premiums for crypto-related coverage are costly and policies can take months to get approved, the publication conveyed, adding that “exclusions can add up fast.” For example, while losses from an interruption of service may be covered, the theft of cryptocurrency that caused the interruption may not.
Citing that many startups cannot afford to pay the high premiums, the news outlet elaborated:
The premiums from insuring such risk can be substantial. By some accounts, underwriters can charge a crypto-related company upwards of five times or more than your average business for coverage against loss or theft.