There’s a tremendous lack of capacity in the insurance sector for cryptoassets, according to the world’s first cryptoasset insurance company.
Cryptoasset insurer Evertas believes there is less than 0.5% of capacity in the global insurance market to cover the value of cryptoassets. According to Evertas, the global insurance industry only has capacity of about US$1 billion to insure cryptoassets. The company said that the lack of supply was driven by three factors: the relatively small size of the cryptoasset market compared to other sectors, a lack of underwriting expertise, and blanket mandates not to write insurance policies in the crypto space.
“The current cryptoasset market is currently worth around US$300 billion, and the premium market here is incredibly small when compared to other, more mature products,” said J Gdanski, founder and CEO of Evertas. “Simply said, this market is too small for large, established carriers to develop and deploy full-time teams. However, some insurers are dabbling in the market to monitor the sector and the premium rates available.”
Gdanski said that a lack of underwriting capabilities in the space meant that many insurers weren’t able to adequately translate the risk for their underwriting teams.
“Underwriting cryptoassets requires an extensive understanding of unique crypto-specific areas such as private key storage/custody, key generation/management, and blockchain networks, which must be examined with an eye to the unique and specific threat vectors that exist with cryptoassets,” Gdanski said.
Gdanski also said that early negative reports associated with cryptocurrencies have also led some carriers to refuse to consider any risk related to cryptoassets. However, Evertas said that insurers’ views on the subject are beginning to change as governments actively evaluate cryptoasset-oriented financial products.
“Projects like Facebook’s Libra digital currency and China’s CBDC continue to highlight the drive toward digitisation,” said Raymond Zenkich, president and COO of Evertas. “Insurance capacity will need to follow to meet the growing relevance of cryptoassets.”
