Crypto insurance industry is one of the emerging fields of in the cryptocurrency and insurance in general. As cryptocurrency markets continues to grow, they are attracting players from other industries. According to a Bloomberg report, cryptocurrency insurance is poised to become a “big opportunity.”
An employee of Allianz, which is one of the biggest insurance companies in the world, also stated that the company was exploring product and coverage options in the space because cryptocurrencies were “becoming more relevant, important and prevalent on the real economy.”
Important Points About Crypto Insurance
- According to a Bloomberg report, crypto insurance is poised to become a “big opportunity.”
- Considering the instability of cryptocurrency, cryptocurrency insurance is now a necessity.
- Increasing value of bitcoin and other cryptocurrencies has led to attacks and theft of online wallets and crypto exchanges.
- Uncertainty in regulations and lack of oversight at cryptocurrency exchanges can further complicate matters for insurers interested in providing services to the industry.
Why We Need Crypto Insurance
The cryptocurrency industry mostly consists of startups and exchanges. These may not be big enough to provide substantial revenues for the crypto insurance industry yet. Based on publicly available information, even North America’s largest cryptocurrency exchange Coinbase has only 2% of its coins insured.
These coins are held in hot storage (or are connected to the Internet). The rest are disconnected from the internet and not much is known about their insurance status.
Best Crypto Insurance
Cryptocurrencyinsurance.io is one of the best crypto insurance companies. You will also get to understand the importance of cryptocurrency insurance when you consider the instability of cryptocurrency. The exponential valuation of bitcoin and other cryptocurrencies has resulted in massive thefts of online wallets and exchanges.
The cumulative result of these hacks is a vulnerable, and mainstream finance either ignores or refuses to take seriously. As an example of of cryptocurrency insurance importance, consider the case of BitGo, a blockchain security company. In 2015, the company claimed to have secured insurance for coins held in its custody.
Cost of Crypto Insurance
Another case that shows the importance of crypto insurance was the hack at Bitfinex, a cryptocurrency exchange that was also a customer. More than $70 million worth of cryptocurrency was stolen. Bitcoin and cryptocurrencies used to present a challenge for insurers. Typically, insurance premiums are based on historical data. Cryptocurrency worth $500 million was also stolen from the Japanese cryptocurrency exchange Coincheck in January 2018.
Such data is absent for cryptocurrencies. Volatility in valuations, where three-figure price swings are not uncommon, can also affect premiums because it reduces the total number of coins being insured. Regulatory uncertainty and lack of oversight at cryptocurrency exchanges can further complicate matters for insurers interested in providing services to the industry.
Personal Crypto Insurance
Bitcoin has always been on the radar of insurance companies. In 2015, Lloyd’s came out with a report listing risk factors for the cryptocurrency. “The establishment of recognized security standards for cold (offline) and hot (online) bitcoin storage would greatly assist risk management and the provision of insurance.” Another important factor is server-side security, cold storage, and multi-signature wallets as possible methods to mitigate risk attacks.
But problems within the cryptocurrency ecosystem could also be a potential source of revenue for the insurance industry. Most insurance products aimed at the industry are bespoke products that have tailored to fit client needs. According to the Bloomberg report, startups and companies operating within the cryptocurrency industry typically opt for theft coverage, which includes cyber insurance and crime.
Best Personal Crypto Insurance
Hacks, however, are excluded. Startups can end up paying as much as 5% of their coverage limits, according to the report. Insurance Journal estimates that annual premiums could be as much as $10 million for theft coverage. In cases of large amounts, the coverage is split between dozens of underwriters for amounts ranging between $5 million to $15 million to ensure that no single insurer is on the hook in cases of hacks.
Attracted to the opportunity, insurance companies have devised new ways to calculate premiums. Christopher Lin, the head of AIG’s North American Cyber Insurance practice head, compared the crypto industry to a digital armored car service. He said that he had adopted a strategy of finding an established business without a similar risk profile.
It also worth mentioning server-side security, cold storage, and multi-signature wallets as possible methods to mitigate risk attacks. Get your crypto and digital assets secure and protected against thefts, loss and attacks with Crypto Insurance.