AIG and Other Major Insurance Providers to Supply Coverage for Crypto Companies

Many major insurance providers are reportedly selling insurance coverage to crypto companies. Bloomberg reports that AIG, Chubb and XL Group are known to provide crypto insurance, while Marsh & McLennan and Aon act as brokers and help clients find crypto insurance policies.

Due to the high-risk environment that encompasses the crypto world, insurance premiums are expensive—at least five times the cost of typical business insurance. But insurance is highly sought after for precisely that reason, as crypto exchanges and other startups continue to suffer from thefts, hacks, and other losses.

Most of the organizations concerned are keeping quiet about the finer details of their insurance plans. The exact offerings are a vast array of different policies:

Crypto companies typically seek out crime and cyber coverage, as well as policies known as directors-and-officers insurance, which covers losses the arise from legal actions against executives or board members

The crypto companies and exchanges that are buying insurance are difficult to identify. Coinbase publicly displays an insurance plan that covers its customers, and is one of the few exchanges to do so. Xapo, a cold storage wallet provider, also insured its vaults last year.

It’s hard to say whether this news will please investors. The insurance is targeted at companies, and investors are more concerned with their own losses in the event of a hack. And as with any insurance policy, there is a chance that the insurance will amount to nothing. BitGo—a company that provides security for Bitfinex—is known to have purchased a plan, which ultimately did not pay out when the exchange was hacked:

Unfortunately for the exchange’s customers, the Bitfinex configuration was “unique” and BitGo’s wallets were not to blame. Their insurance company would not cover the Bitfinex loss, and to this day the exchange still owes tens of millions of dollars to their customers, which they have been slowly paying back using IOU tokens.

Additionally, if an exchange is hacked, exchanges frequently are able to recover a significant amount of cryptocurrency by flagging and stopping the hacker’s transactions—without resorting to insurance. But although many exchanges do reimburse customers after a hack, those reimbursements are often intermittent and not necessarily paid out in the investor’s desired currency. A reliable plan for recovering from crypto crime is still elusive.

The post AIG and Other Major Insurance Providers to Supply Coverage for Crypto Companies appeared first on UNHASHED.