The crypto market’s meteoric rise in 2017 is proof that there is money to be made in the industry. The bull run last year created countless millionaires who saw their fortunes rise along with skyrocketing prices of all digital coins.
But the crypto market can also be disastrous if investors are not careful. Aside from the volatility of prices, hackers are always on the lookout and ready to exploit any vulnerability. For insurance companies, however, the risk of crypto theft is a previously untapped opportunity, and many are now positioning themselves to fill this gap.
The Need for Cryptocurrency Insurance
As adoption of cryptocurrencies increases, it is inevitable that they will become part of a corporation’s asset mix. In fact, some institutional investors have already entered the crypto market, and more corporations should follow suit.
It is always prudent to insure assets owned by a company, whether they are physical or digital. When asked by Forbes if crypto insurance is necessary, AON’s Jackie Quintal replied:
“Corporate insurance, of physical and intangible assets, along with protecting companies and their Board of Directors from regulatory exposures and shareholder litigation, has become a best practice across global industry. Insurance, deployed and structured correctly, serves as balance sheet protection and an efficient risk transfer.”
Incidents where hackers successfully breached the defenses of crypto exchanges highlight the need for companies to insure their cryptocurrency holdings. In January 2018, cybercriminals stole cryptocurrency amounting to USD $534 million from Japan-based crypto exchange Coincheck, a case that later became known as the world’s largest cryptocurrency theft.
Since then, there have been dozens of other lesser-known cryptocurrency thefts. One of these was Bithumb’s hack, where the South Korean exchange lost around USD $30 million in cryptocurrencies in June, according to CNBC. These incidents are a constant reminder that while exchanges are doing their best to safeguard the assets of their clients, cybercriminals are getting more sophisticated as well.
The only way for companies to protect their digital assets is to have them insured. As Quintal told Forbes:
“[T]here have been a considerable number of well publicized thefts of cryptocurrencies. As hackers become increasingly sophisticated, both in the established world of financial services and in a crypto context, it is valuable for firms to understand vulnerabilities, risk control and insurance solutions.”
Crypto Insurance in the Face of Increasing Crypto-related Crimes
As cryptocurrencies are a recent addition to the world of digital assets, underwriting the risk of theft for these digital coins is both a challenge and an opportunity to insurance companies. At the moment, the area is in a constant state of flux as insurance firms are still constantly innovating in trying to come up with the best strategy in terms of regulatory compliance, risk assessment and management, as well as pricing of their products.
Quintal told Forbes:
“Insurance markets are starting to embrace the opportunity to insure cryptocurrency related exposures. This includes insuring theft of assets, offering protection to companies and their Boards of Directors, as well as addressing a variety of other business issues ranging from business interruption to errors and omissions, technology service obligations, and contractual issues.”
But there’s one thing for sure — crypto crimes are only bound to increase in the future based on recent trends. Quintal revealed that in the first half of 2018 alone, a total of USD $1.1 billion worth of cryptocurrencies have been stolen. For comparison, that is three times the amount for the whole of 2017.
As cybercriminals get more sophisticated, companies will be under increasing pressure to safeguard their digital holdings. Thankfully, insurance companies will also be there to offer their assistance along the way.
Insurance Companies Starting to See Opportunities in Covering Crypto-related Exposures was originally found on [blokt] – Blockchain, Bitcoin & Cryptocurrency News.