Insurance companies have joined the ranks of businesses with cryptocurrency related projects. This comes after several financial institutions showed definitive signs of warming up to the idea of cryptocurrencies. Digital currencies’ rapid growth has led major insurance companies to offer insurance against high-value cryptocurrency storage accounts. The primary focus here is on businesses that specialize in cryptocurrencies, but there is a real possibility that these services may be extended to individuals with large sums of coins stored in their wallets.
Insurance underwriters are not publicly sharing many details on their internal operations, but some details have surfaced. Current publications suggest that some of the major insurance companies have started to offer a new type of insurance product: cryptocurrency insurance.
Although this may seem like a high-risk venture for these insurance giants, the leap makes sense when you consider the latest movements in the industry. Banks are starting to roll out their own cryptocurrency exchanges, China will soon be launching their own digital currency, and companies from all over the world are changing the way they deal with payments by including Bitcoin, Ethereum, and similar options.
Even though this market is still unstable, it seems that XL Group, Chubb, and AIG have already started to introduce services to startups with a focus on crypto “coins” including the storage of an existing coin or the creation of new digital currency.
Allianz spokesman, Christian Weishuber, referred to cryptocurrency storage as a “big opportunity” for insurance companies. Just this year, this organization has launched their own insurance plans which will cover theft of digital coins. Further details have not yet been shared by Weishuber or Allianz.
Risk management companies, such as Marsh & McLennan, have also started to offer sourcing expertise. These companies are willing to help “crypto startups” find the right policies to ensure adequate protection for their digital assets.
It Comes At A Price
While the introduction of insurance policies for cryptocurrency storage is big news, it also comes at a great price. One report claims that these policies tend to cost as much as five times more than the average type of business insurance policy. The report claims that a crypto startup should be prepared to pay approximately 5% of the total coverage they are applying for on an annual basis.
Furthermore, some companies may also require multiple underwriters for appropriate coverage on the cryptocurrency that will be stored digitally. The report explains that certain companies may need to have as many as 12 different underwriters before the value of their entire cryptocurrency storage is met. Each underwriter may offer protection of up to $15 million against these digitally stored crypto coins.
Every Policy Will Be Unique
Companies are implementing cryptocurrency storage insurance policies, but they’re doing this in their own unique ways. There are a lot of risks involved with these policies, and the industry is still in a growing phase. Thus, insurance underwriters are being careful. Underwriters have not yet provided specific details on the criteria that are used to determine the coverage limit for a crypto startup or the monthly premium.
XL, one of the latest insurance underwriters to offer insurance policies for crypto startups, mentions that they take a per-case approach. Each client will be interviewed and will present a unique case. The underwriter will then analyze the case in detail before deciding whether they can offer the crypto startup a policy.
Chubb, another underwriter now offering such policies, will not be extending its policies to cryptocurrency exchanges. The company also announced that they would not be supporting digital crypto wallets.
With insurance companies now taking an interest in providing policies for digital coin holders, the industry is likely to grow rapidly. Crypto startups may become more common due to the protection offered by insurance firms. At the moment, however, not every startup will qualify for said policies. Furthermore, the annual policy rate may still be too high for some startups.