Sarah Downy is the Managing Director of FINPRO and co-leads the DART, Digital Asset Risk Transfer, team. In this podcast Sarah shares her insights of the crypto insurance market for 2019 and 2020 along for the need for more education of insurers on the opportunity to serve the need of companies who build blockchain technology and of companies who hold or interact with digital assets.

 

What is blockchain?

As an insurance person, Sarah defines blockchain technology as a technology that stores digital information on a public database with a number of interesting features such as immutability, transparency and traceability. The way blockchain works is that it stores transactions on blocks that are verified and assigned a hash.

She also notes that insurers often confuse blockchain technology with crypto and illicit behaviour. A perception that Sarah and her team are working very hard to change.

 

Overview of the Crypto Insurance Market in 2019

Sarah, describes the crypto insurance market in 2019 as very hesitant and uncertain. The cost of insurance was very high and coverage was very limited. The process for clients to get coverage was both complicated and a lengthy one. Marsh’s clients were mainly focused on two types of insurance:

* D&O insurance

* Commercial crime and specie market coverage

D&O insurance, director’s and officer’s liability insurance protects the individuals running the company. It covers claims brought by investors, shareholders, regulators, against the directors, officers and employees associated with things like a breach of a duty, securities violation, regulatory investigations, or proceedings.

Commercial crime is the coverage that reimburses companies for loss due to theft, disappearance or destruction of property. In the case of digital asset, it protects warm and hot storage wallets as compared to the specie market coverage provides coverage for the loss of digital assets from internal and external theft, damage or destruction of private keys.

A hot wallet is a digital wallet that is online whilst a cold wallet is one which is completely offline. The specie market is insuring vaults that custodians are using to store the private keys.

Sarah notes that if a company is building blockchain technology the pricing should be more favourable and the insurance capacity should be more readily available as opposed to a company that holds a large amount of digital assets or is working with digital assets.  However unfortunately companies that build blockchain technology are not being treated in a similar manner to a normal company building legacy or well known technologies as insurers still think of blockchain technology as crypto and elicit behaviour and they can't separate them out.

However 2019 was also a year of innovation for Marsh as it is the year they launched their Blue Vault facility.

 

5 key trends evolving in the crypto insurance market in 2020

In spite of COVID19 five key trends have emerged in the crypto insurance market in 2020:

* More regulatory certainty

* Transitioning market

* More insurance purchasing

* Crypto maturity

* Testing of an untested market

 

More regulatory certainty

In the insurance industry we are seeing a desire for more regulatory certainty around the digital asset space.