2020 will be the test year for digital assets’ insurance.

Insurance coverage for digital assets is gradually adapting to the rapid changes and growth in crypto assets, says a presentation by Marsh JLT Speciality, a global leader in risk management and insurance broking (Business Insurance).

Key components of digital “risk transfer.”

Companies operating in the sectors of blockchain, cryptocurrencies and various digital assets face a variety of risks.

The many reasons for insurance of digital asset exposure include protection of:

• Customers’ assets
• Assets of Directors and Officers
• Company’s balance sheet
• Regulatory risks
• Business interruption
• Financial losses from errors or omissions
• Employment-related liabilities
• Errors and risks from technology

However, Marsh can arrange a variety of solutions for crypto market participants, even though the risk transfer market during 2019 was very challenging. Key concerns included limited market capacity and skewed premium rates.

Blue Vault

Blue Vault is Marsh’s cold storage insurance solution developed to address these constraints.

It offers protection from loss of digital assets from internal and external theft, damage, or destruction of private keys, which are stored in depositories’ secure vaults (the so-called ‘specie market).

Blue Vault is an innovative consortium that can provide a coverage limit of up to US$150 million per insured through Lloyd’s market. This is a $115 million cold storage coverage with Arch Capital Ltd as lead insurer.

Other types of financial and professional insurance from Marsh

Though hitherto customers have been purchasing Directors’ and Officers (D&O) and commercial crime coverages, they are now likely to move towards other, more comprehensive solutions. For instance:

• Errors and omissions (E&O) and professional liability insurance.
• Cyber insurance.
• Employment practices liability insurance.
• Kidnap and ransom (K&R) insurance.
• Employed lawyer’s insurance.
• Representations and warranties insurance.

What to expect in 2020

The growth of crypto assets will boost the demand for risk transfer services. Previous adverse incidents were not covered by insurance, and this could be a wake-up call for crypto market participants, according to Ankur Kacker, vice president and specie expert on Marsh’s DART team.

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