Cryptocurrency exec dishes on insurance coveragePosted On: Apr. 4, 2019 2:30 PM CST
Cryptocurrency firm Coinbase Inc. has $255 million in coverage, but more insurers to provide cryptocurrency coverage are needed, says the firm’s chief information officer.
The San Francisco-based company, a leading cryptocurrency exchange, has obtained coverage from a group of U.S. and U.K. insurers including Lloyd’s of London syndicates through Aon PLC, said Phillip Martin, who discussed the company’s insurance program in a company blog Tuesday.
Mr. Martin said the company has had an insurance policy covering cryptocurrency in its hot storage systems, which are systems that are connected to the internet, continually since November 2013.
“The rationale has remained the same the entire time: If the worst happens and Coinbase loses customer funds, customers deserve certainty that they will be made whole,” said Mr. Martin.
Mr. Martin said coverage is available under two main classes. Specie policies focus on physical damage or loss of private keys, including misuse or theft in cold storage, which is storage that is offline. He said this market generally insures fine art, precious metals and similar assets when in a vault or on display.
In addition, crime policies cover losses due to hacking, insider theft and fraudulent transfers, in addition to the physical damage or theft of private key data in cold storage.
“There is not enough risk transfer capacity in the market,” Mr. Martin said. Although more insurers have spent time learning about cryptocurrency risks, “the demand for cryptocurrency insurance has increased even faster,” he said.
Policies are generally written on behalf of exchanges or custodians, not directly to cryptocurrency owners, he said.
“We need a world where the ultimate owners of cryptocurrency are able to directly insure their assets with trustworthy, well-reviewed, transparent service providers,” he added.