As the use of digital assets grows, the insurance market is gradually adapting to provide coverages, according to a presentation Tuesday by Marsh LLC.

The broker’s digital asset risk transfer team is focused on securing coverage for companies that use digital assets, according to Sarah Downey, U.S directors and officers product leader in New York, Marsh JLT Specialty. She is also co-leader of Marsh’s digital asset risk transfer team.

When talking about the “crypto” insurance market, as she called it, we are talking about the management liability insurance market, including D&O insurance, professional liability insurance and cyber insurance, she said.

The crypto market also includes specie insurance, typically used for high-value assets such as gold or gems, according to Ankur Kacker, vice president and specie expert on Marsh's DART team, a specie insurance and cold storage specialist.

Specie insurance is used to protect digital wallet keys when they are held in cold storage, entirely offline, much like a gold bar in a vault, he said.

Clients for such coverages include exchanges, broker/dealers, through tech advisers to banks and lenders, Ms. Downey said.

The market for such coverages in 2019 was “challenging,” Ms. Downey said, with limited capacity and premiums for companies involved with digital assets higher than for companies not active in the sector.

Clients mainly focused on D&O insurance and commercial crime coverages, she added.

To help address some of the constraints in the sector, Marsh in September 2019 launched Blue Vault, a $150 million facility with Arch Capital Ltd. as lead to provide cold storage coverage, Mr. Kacker said.

The coming year will likely bring greater regulation and regulatory clarity, Ms. Downey said, which should bring some measure of comfort to underwriters in the sector.

A “transitioning” insurance market may pose challenges for the crypto sector as rates rise and coverages become more limited, Ms. Downey said.

Buyers of coverage are also now moving beyond their core coverages such as D&O to include others such as third-party administrators, she said.

Growth in the use of digital assets will also place new demands on insurance markets as more financial institutions adopt cryptocurrencies and the like, Ms. Downey said.

Coverages may see their first real test in 2020, Mr. Kacker said, as previous incidents involving digital assets have been largely uninsured. Such testing of coverages could be a positive force in the overall evolution of the developing coverage markets, he said.

The claims, Ms. Downey said, will help shape coverages.