Five things all underwriters should know about cryptocurrency

United Kingdom Video June 2020 04:45

Despite Bitcoin having released its open-source software 11 years ago, digital assets and blockchain-type
technologies took a long time to gather momentum in the corporate world. Today, many insurance
companies are exploring the potential of these emerging technologies and insurance solutions in relation
to them.

Now is the time to engage. Watch this short video to learn:

  • Unique cryptocurrency policy wording.
  • The key difference between copies of digital assets vs. physical assets.
  • What are hot storage and cold storage?
  • Underwriting considerations in relation to digital assets.
  • How to assess the security of a wallet.

Video Details

As we mention in the video, most insurers active in this space have only been interested in insuring digital assets against loss or theft if the assets are kept in cold storage, i.e. “offline.” Recently, this has begun to change, as insurers learn more about the technologies and the risks involved.

We understand from Insurtech Gateway that Lloyd's insurance syndicate Atrium is underwriting Coincover's groundbreaking new policy. Cryptocurrency held in hot storage (online wallets) held by their partner BitGo will be protected against third-party attacks on the wallet or the theft of private keys. Coincover is also involved in providing insurance cover for wallets held by its partner, Civic Technologies, up to a value of US$1 million worth of cryptocurrencies.

In addition to providing insurance cover for loss or theft of digital assets, innovative companies are also taking advantage of the technology underlying cryptocurrencies, known as distributed ledger or blockchain technology. 

There are a number of well publicised instances of insurance consortia looking at platform solutions using these technologies in commercial lines applications.

Start-up Nexus Mutual (one of the alumni from NRF’s Insurathon) facilitates a form of pooled risk protection in relation to smart contracts, which are automated computer programmes running over distributed ledgers. The pooling activity involves assessment of the risks of a given smart contract programme by members, including other developers of smart contracts. The proposition is: who is better to assess these risks than other developers?

Another approach is that of Nayms, a home grown Insurtech Gateway start-up, now in its beta test phase. Nayms implements insurance agreements as smart contract software programmes which run over the Ethereum distributed ledger platform. The intention is that the contracts can be transparent, can pay out automatically when pre-agreed conditions are satisfied and can be readily traded. Nayms will be applying this methodology to insuring crypto-risk with matched cryptocurrency.

In summary, this is an interesting time to be involved in the meeting point of insurance and digital assets.