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With hackers becoming ever so adept at finding new ways to steal your cryptocurrency, it’s imperative to find new ways to keep them safe. However, for crypto exchanges, wallets and custodians, just keeping them safe isn’t enough. They need assurance that should hackers wipe their accounts, they would be able to compensate their users. This has led to the emergence of the crypto insurance industry, an industry that’s worth $500 million and growing at a rapid rate.
A few years ago, securing insurance for a crypto company was a Herculean task. Insurers were wary of working with the industry given the inherent risk of hacking, especially with cases of several exchanges losing hundreds of millions of dollars to hackers. For the few companies who did secure insurance, the premiums were quite hefty.
This has changed, led by companies such as Lloyds of London, an insurance market where insurers can partner to offer insurance policies. According to a report by Forbes, Lloyds has become a major player in the crypto insurance sector, facilitating a $255 million policy for Coinbase, a $100 million policy for crypto custodian BitGo and more.
Other companies have jumped at the opportunity as well. Aon, yet another London-based insurer has also become a major player, having also been involved in the brokering of the Coinbase policy. Other companies that have been quick to spot the opportunity include Swiss multinational Chubb, AIG, XL Group, Marsh, AIG and Allianz.
Crypto exchanges are the biggest insurance clients, mainly because they are at the highest risk of attacks from hackers. Since the Mt. Gox hack, crypto exchanges have lost billions of dollars’ worth of crypto to hackers. And while most have sought insurance for their assets, some like Binance have invented new ways of compensating their users in the case of a hack. Binance reportedly sets apart 10% of its income for this purpose in its Secure Asset Fund for Users (SAFU).
Joshua Motta, CEO and founder of cybersecurity insurance startup Coalition, told Forbes that his firm currently has more than 500 clients from the crypto industry. Motta further stated that the crypto insurance industry has grown in just two years to become a $500 million industry. He expects it’ll grow at a higher rate than the 25% that the larger cybersecurity insurance industry is currently growing.
Ty Sagalow, the chief insurance officer at crypto insurance startup BlockRe and a former AIG executive, agreed, saying, “I see this market as the next cyber. It will grow to a multibillion-dollar premium market within the next five to ten years.”
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
