IN SHORT

• Cryptocurrencies offer significant opportunities for insurers, although there are challenges to overcome.
• The volatility of the currencies is a major concern.
• There is a pressing need for clear and consistent regulation globally.

The transaction volume of cryptocurrencies tracked by blockchain data platform Chainalysis grew to US$15.8 trillion in 2021, up 576 per cent on the previous year. Over the same period, criminals acquired cryptocurrencies worth US$14 billion — a significant but much smaller increase of 79 per cent. 

This combination of rising popularity and threat sounds like a massive opportunity for insurers, but, so far, the industry has been characterised by huge demand with little supply or capacity.

Most of the cover that is available is designed to protect institutions such as crypto exchanges against the loss of assets following a breach of security. Assets can include the currency itself and non-fungible tokens.

‘This is still a very new market and there aren’t many insurers who are willing to underwrite the risk,’ says Timothy Chan, senior associate and insurtech lead (Australia) at Norton Rose Fulbright. ‘

‘The main obstacle is that the crypto sector has suffered so many hacking losses.’

Within a crypto exchange, assets are protected by private keys. 

‘Anyone who has a private key can access everything in that account,’ says Chan.

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