Although the penetration of insurance in the cryptocurrency sector remains very limited, the greatest interest of institutional investors and regulatory clarity are two factors that can help stimulate the growth of insurance in the industry, according to AM Best.
As the property of digital assets varies considerably to the other of an American population, the quantification of the emerging segment of cryptocurrency and the insurance of digital assets remains difficult. Many individual holders also prioritize anonymity and often avoid disclosing their assets.
At the beginning of June, Coinbase.com estimated the total market capitalization of cryptocurrency at more than 3 billions of dollars, in particular non-bubble tokens (NFT), active real world and products related to definition. However, this figure is subject to significant changes.
I am better rated that traditional insurers have long been reluctant to offer cryptographic coverage due to the non -traditional and intangible nature of the sector, extreme volatility and lack of actuarial data or claims to support the subscription.
Edin Imsirovic, director of AM Best, said: “A limited number of traditional carriers are currently writing cryptographic coverage, often through excess lines or specialized markets.
“This reluctance comes from a number of factors, including cybersecurity and the risk of theft, because cryptographic assets are vulnerable to hacking, and private keys are vulnerable to theft and fraud.”
The potential for catastrophic losses and risk of accumulation has further hampered the appetite of the insurer. With limited data and subscription experience, many insurers find it difficult to assess the adequacy of prices and have not offered with caution assurance of crimes or in police custody with strict limits and security requirements.
IMSIROVIC added: “Insurers are concerned about the aggregation of losses and, therefore, insurers who write the crypto often provide low coverage limits.
“Insurers are based on data on historical losses for price and model risks. For crypto, significant loss data is rare, given the short history and many companies that ensure themselves in the past. ”
