Greater understanding key to insurers unlocking potential of new business line.
As the cryptocurrency market slowly gains broader acceptance, insurers' views remain divided over the insurability of this industry.
Presently, the cryptocurrency market mostly consists of custodians and exchanges. Whilst it may not yet be large enough to provide substantial revenues for insurers, the insurance market is seriously considering whether, and how, it can support these emerging risks.
With over USD 1 billion worth of cryptocurrencies being reportedly stolen during 2018, the demand for insurance is on the rise. Crypto-related businesses are typically seeking cover for crime/cyber related incidents and technological failures, as well as more traditional civil liability and D&O covers.
Cryptocurrencies present unique challenges for insurers; critical historical data to price and assess these risks is absent. Also, the uncertain (and quickly evolving) regulatory position, worldwide, complicates matters. Whilst regulators are keen not to stifle innovation, the establishment of formal guidelines and standards may greatly assist in provision of insurance.
It remains to be seen whether, as the regulators take more progressive measures across the globe, to enable the industry to grow sustainably, insurers' appetite to write these risks will increase. What is clear is that before insurers do so, a full understanding of the prospective insured's business will be required, rather than adopting a one size fits all approach.
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