2017 and preceding years were pockmarked with stories on security breaches that saw hackers make off with millions of dollars worth of crypto coins. Most recently, Japanese exchange, CoinCheck, lost over $500 million (R6,17 billion) In fact it was hard not to have heard about them seeing as a number of them were directly related to drops in the price of Bitcoin and various other coins.
The market is as highly speculative as it is. Advice from exchanges, that users do not store coins in exchange wallets, barely protects users from risk. It goes without saying that the blockchain industry needs a better way to protect user funds.
Responding to the demand, insurance firms around the world are gearing up to offer theft coverage to blockchain service providers like crypto-exchanges and wallets providers etc. Each insurance provider dealing with differing compliance policies from country to country and attempting to accommodate the unique needs of companies operating in the crypto ecosystem.
XL Catlin, a North American insurance firm, has filed to offer cryptocurrency coverage. XL Catlin’s head, Greg Bangs stated that they had to ensure there actually was a viable market to service (..and how could there not be?).
Obtaining cryptocurrency coverage won’t be the same as covering your house, however. Firms will face extensive scrutiny and have to leap Know Your Customer (KYC), and Anti Money Laundering (AML) hurdles before being green-lighted for cover. Insurers in this field will scrutinize the security measures a company implements, it’s scale of operations as well as how it stores coins. This might result in a standardized way of doing things for firms across the board.
It is said that $10,000 (R123.5 million) will set a company back about $200,000 (R2.47 million) a month. If you consider that Coinbase clears $2 million (R24,7 million) a day, then it actually isn’t all that much.
The cryptocurrency market is projected to grow to transfer trillions of dollars in value, so insurance firms who jump into this arena are going to coin it.