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The cryptocurrency industry has recently exploded, with crypto assets’ market capitalization hitting $2.2 trillion in April of this year. In this publication, we look at cryptocurrencies in general and what insurers could do to prepare for the oncoming wave.
Insurers have been sluggish to enter the crypto realm, which poses a variety of hazards ranging from cyber assaults on exchanges and consumers to transaction price volatility. Despite being a multi-billion-dollar industry, it is still uninsured in 96% of cases. The cryptocurrency gained more wave since the birth of metaverse and likewise insurance in metaverse is looking promising.
Cryptocurrency insurance allows investors and organizations to protect their digital assets against a variety of dangers. Every week, millions of dollars in digital currencies are stolen, leaving investors and business owners powerless because the anonymous nature of this industry effectively covers the perpetrators’ trail while leaving the investor out of money.
What Is Cryptocurrency Insurance?
Cryptocurrency insurance policies are intended to give protection against cryptocurrency theft, losses, and general capital loss. Insurance as a prudent risk management tool is the next step in the growth of cryptocurrency.
Cryptocurrency insurance provides some level of protection against such occurrences, providing the investor with peace of mind that was previously unavailable in the cryptocurrency business. It protects against loss, which means that investors can create and trade their fortunes without fear of a single hack or malicious attack wiping out their entire fortune.
How Does Cryptocurrency Insurance Work
Clearly, crypto is still a volatile market – the average price of NFTs fell about 70% in a week from a high of around $4,000 in mid-February to roughly $1,400 – but that shouldn’t be an excuse for inaction.
Cryptocurrency insurance does not protect against the volatile nature of the market, but it does protect against theft and loss. Consumers across Canada can purchase our cryptocurrency insurance, which provides total protection against hacks and frauds that result in the loss of digital currencies. These can include the following:
- Cyber Liability:
This policy protects the coin/token holder’s or customer’s data if it is lost due to carelessness, hacking, virus, data or cyber breach, etc. It can help protect firms’ reputations if any of these incidents occur.
- Crime Liability:
KASE provides both cold and hot storage solutions for criminals. Protect yourself or your company against cyber-attacks. Know that you are covered in the event of the loss, theft, or hacking of bitcoin assets and valuable data, as well as natural disasters and insider collusion.
- Product Liability, Errors and Omissions:
This type of professional liability insurance protects businesses and their employees from claims of carelessness or poor workmanship. Customers who have lost their cryptocurrency holdings are covered under this policy.
- Legal Liabilities of Directors and Officers:
Data breaches or cybercrime incidents can have substantial ramifications for the afflicted entity’s directors and officers, including regulatory inquiries, shareholder lawsuits, and even criminal investigations. Directors and officers insurance is designed to protect these types of obligations.
Cryptocurrency Insurance Market
Following the recent spike in popularity and price, large corporate investors such as Tesla, which purchased $1.5 billion in bitcoin (BTC) in January 2021, and business-intelligence software company MicroStrategy, which holds an aggregate of $2.2 billion in BTC, have begun to take an interest.
To be sure, the insurance market is treading carefully when it comes to crypto, and with good reason. On the one hand, crypto has a lot of promise in terms of attention and profits, which will only increase as its applications expand. However, because of its intangible and hackable character, it is still difficult to comprehend, insure, and govern.
Here are some of the ways the insurance industry can take on the cryptocurrency space:
Accepting cryptocurrency as a payment method
Crypto is being accepted as a payment method by a limited but rising number of insurers. Verification transparency and payment monitoring are two advantages of doing so. Accepting premiums in the risk currency avoids FX volatility in circumstances where insurers are underwriting crypto assets. Time will tell whether crypto is truly becoming accepted as a legitimate method of payment, or if most people are only interested in garnering attention from policymakers and bitcoin holders.
Cryptocurrency as a balance sheet item
Few insurers have looked to invest directly in crypto assets due to their volatility. MassMutual, an American insurance and financial services company, is the only prominent example of an insurer owning crypto as a balance sheet asset. It invested $100 million in Bitcoin in 2020, as well as a $5 million equity investment in NYDIG, a crypto custody provider.
The scenario may change as insurers and investors seek alternatives to fixed income investments’ historically low yields. Other factors encouraging this movement include the recent approval by US financial regulators in January of the use of public blockchains by established banks, as well as talk of Bitcoin’s diminishing implied volatility (or expectations for price turbulence), which has fallen from a peak of 145 percent in mid-January to 75 percent in
During the NFT boom, a number of other insurance-related projects were launched, including ideas to offer insurance policies in a special NFT format.
As cryptocurrency underwriters
Insurers, on the other hand, can provide coverage for crypto firms. Only a few vendors are able to give crypto firms with this level of protection. One example is Evertas, which bills itself as “the world’s first cryptoasset insurance company.” D&O insurance is in scarce supply in general, but especially in crypto, where insurers are concerned about the lack of legal and regulatory certainty. As legislators and regulators provide more clarity, insurers should find it easier to provide coverage.
There are two approaches for insurers to cover crypto-related risks. First, they can provide coverage for crypto assets in the form of crime and custody plans, such as theft, hacking, or cold-storage key loss. Great American Insurance Group was the first to do so in the middle of 2014 with their crime package, which covers bitcoin holders for forgery and computer fraud, among other things. Likes of Nexus Mutual, launched in 2017 by a former Munich Re executive have emerged since then, which is a decentralized insurance fund that offers “discretionary protection” with community-driven management and operates on the Ethereum blockchain.
Why Does Cryptocurrency Need Insurance?
According to a fascinating post by AON about cryptocurrency insurance, over $1.3 billion has been stolen from exchanges since the first Bitcoin block was generated in 2009, with an average of $2.7 million of assets lost per day in 2018. As a result, insurance is critical in assisting those who seek to possess digital assets in reducing their risk.
In the case of crypto, a potential thief only needs to break into a crypto holder’s key credentials and digitally transfer as much as they want directly into their anonymous account.
You’ll have to figure out who the finest crypto-insurance company is for yourself. However, Lloyds appears to be on top of the list, with AON cryptocurrency insurance making waves as well. Also, Coincover, a British-based company that offers a variety of insurance protection and goods, is worth a look.
What Doesn’t Crypto Insurance Cover?
Again, this is highly dependent on the insurer, but in general, direct hardware loss and damage, as well as the transfer of bitcoin to a third party, are not covered by the insurance. It also won’t protect against the asset’s blockchain being disrupted or failing.
The Dangers Of Cryptocurrency
As more people become involved in cryptocurrency, there is an increasing number of hackers looking to steal money from both crypto wallets and exchanges.
On 20 August 2021, about $100 million was taken from the Japanese crypto exchange Liquid, while more than $600 million was reportedly stolen earlier in August from the Poly Network crypto platform. While the majority of the money was recovered by a hacker known as Mr White Hat, the fact that so much was taken will have worried crypto investors. While Poly Network was the victim of ethical hacker looking to expose the system’s flaws, the next organization to fall prey may not be so fortunate.
Hackers target more than just platforms and exchanges. Wallets being compromised, yet many individual investors still hold their funds on exchanges.
Insurance is a good method to have peace of mind and secure your crypto assets, whether they are NFT, tokens, altcoins, or bitcoin.
Will Insurance Cover Cryptocurrency Claims
Companies or individuals who receive subpoenas or lawsuits should assess whether insurance will cover the probable high defense costs. The most likely coverages to be relevant are directors and officers liability insurance and professional liability insurance.
D&O insurance generally covers claims for wrongful acts committed against an insured throughout the policy period. Coverage is typically provided in three ways: to an insured individual when he or she is not indemnified by the company; to the company to reimburse it for the indemnification provided to an insured individual; and to the company if the company is subject to a securities claim or any other type of nonincluded claim.
Brian Scarbrough, a partner and co-chair of Jenner & Block’s insurance recovery and counseling group, and Justin Steffen, a partner in Jenner & Block’s complex commercial litigation department, are among those who have written extensively on cryptocurrency insurance claim.
Best Cryptocurrency Insurance Companies
The insurance sector is transforming as a result of blockchain and cryptocurrencies, particularly in the crypto and decentralized finance (DeFi) space. Some organizations are even using blockchain technology to decentralize insurance funds, which means that anyone can buy tokens that represent a piece of the insurance fund and profit if the fund’s value rises.
You should choose an insured cryptocurrency exchange and crypto wallet to reduce your risk as an investor.
- Best for Decentralization: Nexus Mutual.
- Best for Theft & Loss: Evertas.
- Best for Insurance Variety: Etherisc.
- Best for Crypto Wallets: Coincover.
- Best for Crypto Exchanges: Aon.
- Is Crypto FDIC Insured?
In Conclusion
There is no avoiding the fact that cryptocurrencies will alter our understanding of and interaction with money. They will influence how we protect our financial future sooner rather than later.
But what about individual private crypto insurance? While some organizations appear to be evolving to provide private crypto insurance, the levels and extent to which they do so appear to vary greatly.
Our advise is to begin slowly. Build your portfolio with expertise and patience, using trustworthy exchanges, and avoid “too good to be true” promotional deposits that promise large rewards.
Can you insure a crypto wallet?
Since Coincover’s Lloyd’s-backed insurance was released in 2020, you can now do so. One thing to bear in mind is that the insurance only covers damages up to £1,000, so if you have less than that, it may not be appropriate for you.
Can You Purchase Personal Crypto Insurance?
Yes, though it isn’t as straightforward as a one-word response. “Most crypto assets are not currently covered by insurance,” says Brian O’Connell, an insurance expert at Insurance Quotes. “This is owing to the relative immaturity of the cryptocurrency sector.
The exchanges that trade in cryptocurrencies are more likely to hold the majority of the cryptocurrency insurance market than individual traders. As a result, you’ll need to verify directly with your platform to determine if you’re insured as a crypto buyer when trading on that platform.
How much does crypto insurance cost?
Insurance companies, unsurprisingly, are hesitant to make their policy pricing public, so you’ll have to talk to them about it.
Can you get insurance on bitcoin?
Yes, you certainly can. You and the insurance company will debate how much coverage you can receive and what exactly it will cover.
What crypto Wallet are Insured
Most wallets, such as Civic, use the insurance service Coincover to provide insurance assurances to its users. Civic’s coverage protects users’ funds in the event that Civic goes out of business. The Coincover Deposit Guarantee is what this is.
What crypto exchange are insured
Most of these exchanges are likely to fund their own insurance policies. Take Binance for instance during the latest Binance hack, Binance assigned 10% of its overall trading costs to an insurance fund, which paid out $40 million. Equilibrium, a stable coin supplier, keeps a fluctuation fund worth $10.8 million to defend users if their stable currency’s value is ever endangered.
Is crypto covered by home insurance
An Ohio court has found that stolen BitCoin likewise other cryptocurrencies qualifies as lost “property” under a house insurance policy, in a case of national first impression.
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