What Is Crypto Insurance? 💼
What Is Crypto Insurance? 💼
For an industry that is evolving and stepping into larger acceptance, designing insurance products is not easy. Considering the risks, insurers are going through the figuring out phase of evolution.
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Fear of losing your crypto to hackers?
Nightmares of forgetting your private key?
Crypto insurance can be your knight in shining armour.
What is Crypto Insurance? It provides coverage for virtual assets lost or stolen under specific circumstances. It protects cryptocurrency investors or businesses against various risks associated with the crypto industry.
Key characteristics
Focuses on risks specific to the cryptocurrency industry, such as hacks, thefts, and cyber fraud.
Coverage is limited compared to traditional insurance.
Premiums can be high due to the volatility of cryptocurrency values and the risks involved.
The crypto insurance market is still evolving, with limited coverage options available for retail investors.
Types of crypto assets covered?
The types of crypto assets covered by insurance can vary depending on the specific policy and insurance provider. Generally, crypto insurance can cover a range of assets and risks within the cryptocurrency industry.
What does it cover?
Theft: If your crypto is stolen due to a hack or security breach, insurance can help recoup your losses.
Loss: Accidental deletion or loss of access to your crypto due to technical issues might be covered.
Fraud: Schemes like phishing attacks or fake ICOs could be financially mitigated with insurance.
Operational Errors: Exchange mistakes or errors by custodians leading to your crypto loss could be covered.
Legal Issues: Coverage might extend to legal disputes related to your crypto holdings.
Protocol failures: Protects against glitches in the code, faulty economics, or bad governance of a platform.
Bridge malfunctions: Reimburses you if your tokens get lost when moving between blockchains.
Custodian issues: Get coverage for hacks or shutdowns of exchanges or wallets holding your crypto.
What it doesn't cover?
Crypto insurance typically doesn't cover losses due to 👇
How does it work?
Risk Assessment: Insurers evaluate your crypto holdings, security practices, and trading activity to determine your risk profile.
Customised Plans: Based on the assessment, insurers create insurance plans that fit your specific needs and risk tolerance.
Premium Calculation: Factors like market conditions, security measures, and coverage limits influence the premium amount.
Underwriting: Similar to traditional insurance, underwriters assess the insurability of the risk and set coverage conditions.
Claims Process: In case of a covered loss, you file a claim with the insurer, providing evidence. After verification, the insurer reimburses you for the loss as per the agreed-upon amount.
Crypto Insurance vs Traditional Insurance?
Crypto Insurance for Individuals and Businesses
Where can you get one?
Evertas - Business-focused insurance solutions.
Superscript - Insurance for companies in regulated jurisdictions.
Embroker - Insurance for crypto businesses (D&O, E&O).
Nexus Mutual - Covers major players like Aave, Curve, and Uniswap.
Uno Re Focuses on smart contract, de-peg, and validator slashing issues.
Etherisc - Currently offers licensed flight delay insurance, but many other types are under development.
InsurAce Covers vulnerabilities, custodian risk, stablecoin de-pegs, and even bridge transfers.
Coincover - This company insures crypto wallets, exchanges, and smart contracts.
Aon - Some established insurance companies are entering the crypto space. Aon, for example, offers insurance for crypto exchanges and miners.
Exchange-provided protections
Coinbase: Offers custodial wallet insurance for a portion of user's crypto assets against exchange hacks. Cash holdings also benefit from FDIC pass-through insurance (up to $250,000).
Gemini: Another exchange with custodial wallet insurance protecting user funds.
Binance: Doesn't offer true insurance but has a Secure Asset Fund for Users (SAFU). Internal fund for emergencies like hacks on their platform (coverage details unclear).
Limitations of Crypto Insurance Coverage
Limited comprehensiveness: May require multiple plans for full protection.
Coverage exclusions: Some policies may exclude human error, excludes Ponzi schemes, hardware damage, and blockchain disruptions.
Lack of coverage for retail investors: Mostly caters to businesses and exchanges.
Limited availability: Insurance may not be available for all crypto exchanges.
Challenges in estimating values: New technology makes it difficult to establish baselines for values and risks.
Limitations in cyber insurance: Excludes private key theft, a major crypto risk for all investors.
Regulatory oversight: Lack of regulation in the crypto industry makes it challenging to hold exchanges accountable for losses.
Speed and efficiency: Crypto exchanges can be slower and less efficient than traditional exchanges.
Liquidity issues: Limited range of coins and tokens offered by some exchanges makes trading less popular cryptocurrencies quickly and efficiently.
Security and transparency: Concerns regarding security protocols and transparency within crypto exchanges.
Evolving nature and challenges for insurers
They're still figuring out how to value assets like mining rigs, which have a unique combination of depreciation and income generation. This lack of historical data makes it difficult for them to set baselines for premiums and coverage options.
While some progress has been made, insurance for individual crypto holders is scarce. Exchange hacks and custodial wallet breaches can be covered in some cases, but options are limited for users who store their crypto in private wallets.
Despite these challenges, crypto insurance is expected to become more comprehensive in the coming years, with more insurance companies entering the market.
TTD Week That Was 📆
Saturday: Crypto Gaming Gets $1B Investments 🕹️
Friday: Who's the Wall Street Darling? 🏦
Thursday: One Brotherly Heist 🫂💰
Wednesday: Why Tornado Cash Matters? 🌪️
Tuesday: Is The Dumb Money Back? 💸
Monday: Fate Of Ethereum ETFs 💊
TTD Week in Funding 💰
Peaq. $20 million. Berlin based deep-tech company developing decentralised infrastructure for the Economy of Things (EoT) on Polkadot.
Chainstack. $6 million. Infrastructure provider. Developers can use their nodes to run and scale blockchain applications.
Param Labs. $7 million. Gaming company specialising in multiplayer blockchain-integrated games through player-owned digital assets.
Humanity Protocol. $30 million. The human layer for Web3. Unique-human authentication mechanisms, providing complete ownership over data and identity.
Focus Tree. $2 million. Productivity app to fight social media addiction that rewards users for putting down your phone.
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