INTERNATIONAL - Major global insurers are starting to offer protection against cryptocurrency theft, willing to tackle daunting challenges it brings rather than miss out on this volatile and loosely regulated, but rapidly growing, business.
So far only a few insurers sell such insurance, including XL Catlin, Chubb, and Mitsui Sumitomo Insurance. Yet several others said they are looking into theft coverage for companies that handle digital currencies like bitcoin and ether, which trade between anonymous parties.
Such efforts so far have garnered little attention, but the emergence of an insurance market marks an important step for the nascent industry’s mainstream recognition.
The risks are clear: digital currency investors have already lost billions from dozens of cryptocurrency hacks, technical errors and fraud. Many hacked exchanges later shuttered.
On Friday, Tokyo-based exchange Coincheck became the latest casualty, reporting a loss of around $534million (R6.35billion) worth of coins to hackers.
For insurers the challenge is how to cover those risks for customers they know little about, who use technology few understand and represent a young industry that lacks troves of data insurers usually rely on in designing and pricing coverage.
Christopher Liu, who heads American International Group’s (AIG’s) North American cyber insurance practice for financial institutions, said the answer is to find an established business with a similar risk profile and try to adapt what works there.
“It’s sort of akin to a digital armoured car service,” he said about cryptocurrency firms.