Old Mutual Limited, the Pan-African insurance giant, will no longer insure businesses that deal with cryptocurrencies, the company has announced. The higher-than-normal risk associated with the industry, as well as its speculative nature were some of the reasons the company cited for its decision. It joins a high number of insurance companies globally that have either completely denied crypto businesses their services or made them pay ridiculously high premiums to access coverage.
The company, which is based in Cape Town, South Africa, said it had been conducting extensive research into the industry according to a report by CoinDesk. It had also reviewed claims from clients that have incurred losses to crypto mining equipment. Its conclusion was that the crypto industry isn’t viable for its insurance arm. It had thus began advising its branches not to insure crypto-related businesses.
Christelle Colman, an insurance expert at Old Mutual commented: “We have chosen not to provide cover for this type of risk as it is quite tricky to conduct a proper risk analysis of an unregulated fledgling industry that is already on the radar of financial authorities due to the unfortunate association with money laundering and cyber crime.”
The company further noted that that the crypto mining industry in particular is exposed to more risks than the average business. Crypto miners use high-cost computers and servers which run hefty ASIC devices. This tends to overload the computer’s graphic processing units. Additionally, miners run their computers continually, exposing them to the risk of overheating.
And those aren’t the only challenges that come with the crypto mining industry, Colman added stating: “Even doing a comprehensive inventory of the insured equipment is difficult because the value of the highly modified computer equipment is typically inflated and almost impossible to verify as it is usually imported from obscure suppliers in the Far East.”
While insurance for the crypto industry has generally been difficult to get, there have been improvements in the past few years. Some of the world’s largest insurers have started offering crypto companies insurance. BitGo and Coinbase have been pioneers in this field, obtaining $100 million and $255 million policies respectively.
A Bloomberg report last year revealed that big names such as AIG, Lloyd’s of London, XL Group, Marsh and McLennan, Chubb, Aon, and Allianz had started offering customized policies to crypto companies. Aon has especially been active, claiming to control over 50% of the crypto insurance market.
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