As cryptocurrency markets do to mature, they do attract players from other industries and this does include the insurance industry as well.
Cryptocurrency insurance is no doubt considered to be a big opportunity due course of time. They were becoming rather more relevant, important as well as prevalent when it comes to the real economy.
Why Does The Cryptocurrency Ecosystem Need Insurance?
As of now, the cryptocurrency business, which does mostly consist of startups as well as exchanges, is not big enough to provide substantial revenues for the insurance industry.
Insurance for cryptocurrencies has indeed become important as one needs to take into consideration the instability of the cryptocurrency ecosystem. The skyrocketing valuation of bitcoin, as well as other cryptocurrencies, has indeed resulted in massive thefts of online wallets and exchanges.
Bitcoin, as well as cryptocurrencies, do present unique challenges for insurers. In fact, insurance premiums are indeed based on historical data and such data is absent for cryptocurrencies. There is no doubt volatility in valuations, as three-figure price swings are not in fact very uncommon. These can also affect premiums as they tend to reduce the total number of coins being insured.
Regulatory uncertainty, as well as lack of oversight at cryptocurrency exchanges, can, of course, further complicate matters for insurers who are interested in providing services to the industry.
Bitcoin has indeed always been on the radar of insurance companies. As far back as 2015, Lloyd’s did come up with a report which listed risk factors for the cryptocurrency. The fact that one does observe the establishment of recognized security standards for cold (offline) and hot (online) bitcoin storage which does greatly help in assisting the risk management and provision of insurance. It also has been taken note of that the server-side security, cold storage; multi-signature wallets are possible methods to mitigate the risk attacks. Read Stalemate overuse of big data in governance
A Source of Revenue
But problems within the cryptocurrency ecosystem do also have a potential source of revenue for the insurance industry. Most insurance products do aim at the industry as the products are tailored to fit the needs of the client. Judging by reports, startups and companies operating within the cryptocurrency industry do typically opt for theft coverage, which does include cyber insurance as well as crime. Hacks, however, are not included.
Big insurance companies such as XL Group, AIG and Chubb are indeed quietly making offers such as cryptocurrency insurance as cryptocurrencies as well as blockchain technology do continue to gain much acceptance.
Insurance companies are indeed not so active in publicizing their activities as they would like to avoid liabilities.
More crypto startups are indeed keen on viewing insurance coverage as being important as they do appreciate the need for protection from crime, as well as the required need for coverage for legal actions against executives as well as board members.
It is necessary to have insurance for crypto companies, as protection can indeed make it easier for companies to work with banks.