Crypto Insurance Market To Grow, Lloyd’s Of London And Aon To Lead (#GotBitcoin?)
The cryptocurrency insurance market is expected to grow at a faster rate if United States regulators provide more regulatory clarity, according to industry experts. Crypto Insurance Market To Grow, Lloyd’s Of London And Aon To Lead (#GotBitcoin?)
As Forbes reported on Sept. 5, CEO of San Francisco-based cybersecurity agency Coalition, Joshua Motta suggested that the market for digital currency insurance is now worth between $200 million and $500 million in premium revenue. He expects the market to outpace the current 20% to 25% expansion rate of the cybersecurity insurance sector.
Lloyd’s of London, the world’s leading insurance market providing specialist insurance services to enterprises, seems poised to become one of the major players in the crypto insurance sector following April news of Coinbase revealing insurance coverage for its hot wallet crypto holdings, reportedly covering a $255 million limit via Lloyd’s.
“The Next cyber”
According to Eric Boyum, head of the technology insurance brokerage arm of Aon — an insurance broker that purportly occupies 50% of the crypto-insurance market — the crypto market insurance sector would grow even faster once U.S. regulators clarify whether digital assets are deemed securities and should comply with the same laws that govern public companies.
Commenting on the issue, Ty Sagalov, insurance industry veteran and founding member of the first licensed and regulated insuretech company in the U.S. Lemonade, said:
“I see this market as the next cyber. It will grow to a multi-billion-dollar premium market within the next five to ten years.”
Crypto Goes Into Insurance
This summer, Coinbase was reportedly looking to launch its captive insurance company in partnership with Aon. Such a solution was expected to allow the company to keep the money that would be normally spent on the insurance premium, reportedly nearly all Fortune 500 firms maintain captive insurance companies.
Also, Aon will reportedly provide crime insurance coverage for institutions using Metaco’s SILO cryptocurrency asset infrastructure solution for hot and cold storage, which implements hardware security module-based technology.
UK Startup Launches Crypto Insurance, 24/7 Bitcoin-Monitoring Service
Cardiff-based cryptocurrency insurance startup Coincover has launched an insurance policy covering theft and loss.
Local news outlet Whales247 reported on Sept. 24 that this is “the first and only service to guarantee digital funds held online will not be lost or stolen.”
Coincover’s service reportedly monitors the wallet at all times and issues warnings in case of suspected theft, recovers funds in case of private key loss, manages key backups, provides cash replacement value in case of theft, and checks for any suspicious activity.
Making Crypto Less Risky
Furthermore, the startup covers over 100 different crypto assets and the company has been invited by the UK’s Department for International Trade as one of the eleven insurance technology companies to share expertise in the Silicon Valley market. Coincover co-founder David Janczewski commented on the development:
“Cryptocurrency ownership is growing fast and becoming more mainstream, but it can still feel like a risky investment. Virtual currencies, by their very nature, are a new concept for many.”
Janczewski also notes that cryptocurrencies have been attributed to crime and scandal since the start as well as hacks and thefts. These are the issues his company is trying to solve, he explained.
As Cointelegraph recently reported, according to industry experts the cryptocurrency insurance market is expected to grow at a faster rate if United States regulators provide more regulatory clarity.
Meanwhile, cryptocurrency insurance is becoming a more prevalent service in the industry, namely for custodial services. For instance, earlier this month Bitcoin (BTC) futures firm Bakkt announced that deposits held in its warehouse are protected by a $125 million insurance policy.
In Rare Deal, Crypto Custodian Wins Insurance On Full Value Of Client Assets
Marsh & McLennan, the world’s largest insurance broker, has arranged an unusually generous and comprehensive insurance program for a new cryptocurrency custodian called KNØX.
Unveiled Tuesday, Montreal-based KNØX is courting wealth managers and hedge funds with its cold storage service, in which the cryptographic private keys to a wallet are kept offline. To give potential clients additional peace of mind, the insurance arranged by Marsh covers them in case of external theft and internal collusion, up to the full value of their holdings.
By contrast, often insurance policies covering crypto assets are shared across multiple clients of a custodian, explained Alex Daskalov, co-founder and CEO of KNØX. For example, a custodian holding $1 billion in assets, and advertising a $100 million insurance policy may only be 10 percent insured, in which case the customer is given a false sense of security, Daskalov argued.
If the customer were to experience a total loss of $100 million they would only be reimbursed $10 million.
The Knøx Program Was Developed With Marsh To Remove Ambiguity Of This Sort, Daskalov Told Coindesk:
“Often we see people purchase an insurance policy and then hold in the aggregate funds well above the limit of that insurance policy. So for us, it was an important guarantee that when a customer is on-boarded to our platform, the full value of their assets is insured.”
That’s not to say the cover is limitless. “There is, of course, an upper ceiling,” Daskalov acknowledged, without saying precisely what it is.
Asked if KNØX was ready to hold and insure north of $100 million for any of its customers, Daskalov said this would “not be a problem.” (To put that figure in context, until recently, the largest amount of insurance cover heard of in the crypto space was when Coinbase was reported to have up to $255 million).
Jennifer Hustwitt, senior vice president at Marsh, told CoinDesk the insurance cover being offered with the KNØX solution was led by insurance company Arch and supported by various syndicates at Lloyd’s of London.
KNØX recently raised $6.2 million in funding led by Initialized and iNovia, with participation from Fidelity Investments Canada, FJ Labs, and Ferst Capital.
Daskalov said that for custodying and insuring 100 percent of a customer’s assets, KN0X would charge a fee starting at 1 percent of assets and work down depending on how much business was being conducted. To get a customer’s assets out of cold storage in order to trade would normally take an hour, although the service level agreements (SLAs) are more conservative, he said.
While scarce, crypto insurance cover is popping into the headlines with increasing regularity, thanks to the likes of blockchain security firm BitGo touting $100 million cover from Lloyd’s and Coinbase exploring new avenues with the number two insurance broker Aon, which is also working with custody providers Anchorage and Volt.
Hustwitt said there has been a net expansion of insurance capacity available for digital asset risks in the past six months.
Some carriers are starting to participate in programs who previously had not and this is edging up the capacity and size of insurance deals, she said. “At any given time the amount of overall capacity will depend on a risk-by-risk basis. Having said that, there is upwards of $750 million to $1 billion in potential insurance capacity available across specie and financial institutions insurance markets.”
A Caveat Would Be That The Carriers Participating And The Capacity Changes On A Month To Month Basis, Said Hiustwitt, Concluding:
“Our working metric right now is up to a billion. We break new ground with every deal we do.”
Ledger’s Vault Scores $150 Million in Crypto Insurance From Lloyd’s Syndicate
Ledger, the creator of the iconic Nano hardware wallet, is wooing institutional investors to use its technology to custody cryptocurrency for themselves with the help of big-name insurance broker Marsh.
Marsh has arranged a $150 million insurance policy from Lloyd’s of London syndicate Arch for users of the startup’s Ledger Vault technology platform, the companies announced Thursday.
The move is another sign that the insurance industry is gradually becoming comfortable writing coverage for digital assets – widely considered a prerequisite for institutional investment.
In the past year, quite a few crypto custodians have trumpeted insurance cover in the hundreds of millions. Unlike those firms, Ledger Vault is not a custodian; rather, it provides tools for investors to store their own crypto.
“We didn’t have to do this. We are buying insurance for the Vault platform at no additional cost to customers of our platform,” said Demetrios Skalkotos, global head of Ledger Vault.
Ledger’s policy covers third-party theft of private keys in the event of a physical breach of a hardware security module (HSM) in one of its data centers. Also covered is the entirety of the on-boarding process for clients which involves the generation of private keys within the company’s HSMs, as well as collusion within Ledger leading to insider employee theft.
The policy does not, however, cover theft via a third-party remote hack of the type reported fairly regularly at crypto exchanges around the world. The Ledger Vault solution itself is meant to prevent this type of hack by isolating private keys from the internet.
Firms using Ledger Vault set up their own transaction controls and governance procedures. The firm is trying to move away from the frame of reference of online “hot” wallets and offline “cold” ones, calling itself “temperature-agnostic.”
On top of the new insurance policy, Ledger Vault clients will be well-placed to arrange their own dedicated primary insurance facilitated and “fast-tracked” by Marsh and Arch, the companies said.
“Clients that are part of this insurance program for Ledger Vault have the ability to obtain a dedicated limit that is dependent on the assets held on the Ledger Vault platform,” said Jennifer Hustwitt, senior vice president at Marsh & McLennan Companies, the insurance broker’s parent. “It would be separate from the $150 [million] that Ledger is purchasing.”
James Croome, vice president of specie at Arch, said in a statement that the syndicate “spent over six months working with the Ledger Vault team to develop a customized offering for their clients.”
Ledger has sold 1.5 million units of its flagship consumer product, the Nano, a device for storing private keys to crypto wallets.
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