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 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.