June 20, 2022 — FINDING insurance coverage for cryptocurrency assets these days is about as difficult as striking it rich from Bitcoin.
Matthew Studley, senior VP of complex risk at global insurance brokerage Hub International, told Thompson’s recently that only a handful of insurers around the world currently offer proper coverage for crypto assets.
That means brokers need to inform clients ahead of time about the challenges with finding insurance coverage that will meet their needs, he said.
“They are often surprised by the price of the coverage or the restrictions on the coverage and getting a quote is an awful lot of work,” Mr. Studley said.
“Their experience has been with other types of coverage like auto insurance, where you can get as many quotes as you want.”
The limited number of insurers willing to offer the coverage means that brokers must be sure their clients put their best foot forward when applying for a policy because there might not be a chance to look elsewhere if they are declined.
“It’s really being thoughtful about how you’re going to articulate what your business does, where you are in the cryptocurrency ecosystem and then all of the operational risk procedures that limit the chance that the insurance would ever pay,” he said.
Clients who have not prepared before they look for cover risk paying extremely high premiums or even failing to obtain insurance altogether.
That means the broker has to really work with the client ahead of time to make sure they are not wasting their time, Mr. Studley said.
“The more advice we can provide, the better the risks will look,” he said.
“We try to be external risk management advisers for these clients, as opposed to just trying to find an insurance quote, get insurance, take a fee and move on.”
Reinsurer Swiss Re said in its latest Sonar report that crypto assets present challenges for insurers because covering them may lead to unexpected losses.
It said certain crypto assets may be implicitly covered by existing property or cyber policies. Consequently, there could be a notable rise in claims in those lines of business.
And it said risky investments in crypto assets and unexpected associated tax liabilities could threaten company viability and trigger credit and surety claims.
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