Insurance industry has been around for much longer time than cryptocurrency. However insurance companies are now beginning to offer cover for digital currencies. Cryptocurrencies are highly volatile and crypto startups see insurance as a must to safeguard investor funds in an unlikely event. Past events such as Mt. Gox hack and the recent attacks at Coincheck and Bancor have highlighted the importance of having insurance.
Insuring a highly risky sector
Cryptocurrency exchanges have been the target of attackers. On several occasion attackers were successful in stealing digital currencies of investors stored at the exchange. If these digital currencies were insured then investors would not need to take a haircut on their holdings. Insurance companies have sensed that the new market could help bring more revenue for their business.
Christian Weishuber, a spokesperson for Allianz said, “Insurance for cryptocurrency storage will be a big opportunity. Digital assets are becoming more relevant, important and prevalent on the real economy and we are exploring product and coverage options in this area.”
Market players of the industry
Leading insurance companies are setting up dedicated teams for clients from cryptocurrency and blockchain industry. AON has taken quick decisions and is now one of the market leaders. It has worked to reduce the time taken to process one application and tweaked policies to include crypto protections.
However crypto insurance isn’t cheap and not every startup can afford it. Insurers know that there is high risk and security can be breached. The cost of insurance has deterred some crypto firms from taking an insurance. BitGo was one of the first crypto ventures to have an insurance but it was forced to drop it within one year due to high cost.
Crypto industry realizes value of insurance
More and more crypto projects are open to the idea of having an insurance. Annual premiums for a typical $10 million theft protection stands at $200,000 or 2 percent of the sum insured. A critical factor to be considered is the trading price of Bitcoin and other cryptocurrencies. If Bitcoin prices rise 30 percent in 1 year after taking the insurance then there is a 30 percent decrease in the number of Bitcoin that was insured. This is due to an increase in Bitcoin price.
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