The growth of the cryptocurrency market has brought the threat of hacking to traders, and Coincover's insurance policy seeks to protect them from losses
Lloyd's underwriters will cover a growing threat to the cryptocurrency market (Credit: PixaBay)
The Lloyd’s of London insurance market has launched a new policy in conjunction with Coincover to indemnify cryptocurrency “hot wallets” against theft or other malicious hacks.
Starting at £1,000 ($1,300), policies will be flexible, increasing or decreasing in line with the price changes of crypto assets — meaning customers will always be covered for the real market value of their currency.
Coincover, which calls itself a crypto “lifestyle” service provider, has offered insurance for offline depositories — known as “cold storage” — since 2018, but the new arrangement will be the first time it has carried the risk of an online wallet being hacked.
CEO David Janczewski said: “As the crypto-asset market heats up again at the start of 2020, a new wave of crypto-curious customers are standing by at the ready to jump in, having previously been put off by the lack of adequate protection against theft and loss.
“With this innovative new policy, we can remove these barriers and broaden the appeal of crypto.”
Who designed the policy?
The Coincover policy was designed by Lloyd’s underwriting syndicate Atrium, with assistance from the firm itself.
Capacity will be provided by the underwriter alongside an undisclosed number of other Lloyd’s insurers, including Japanese giant Tokio Marine Kiln and specialist provider Markel.
The policy is the second insurance product to come out of the Product Innovation Facility (PIF) — a Lloyd’s initiative started last year to design coverage that fits emerging and developing risks not currently served by the marketplace.
Atrium underwriter Matthew Greaves said: “There is a growing demand for insurance that can protect cryptocurrency as it becomes increasingly popular.
“It is a testament to Lloyd’s that the market has put together an innovative solution to mitigate these new risks and protect against theft — from physical as well as online vaults — thereby providing customers with peace of mind that their assets are safe.”
Lloyd’s support for cryptocurrency coverage
According to Lloyd’s, the PIF has £150m ($192m) in underwriting capacity at its disposal, contributed by 27 underwriters.
The first product was designed to reduce cash-flow volatility for hotels by paying out if any unexpected event causes a pre-defined gap between actual and expected profits.
Now, as the cryptocurrency market is expected to grow, with one report from Markets and Markets, Lloyd’s has turned its attention to the growing risk of traders being hacked.
Lloyd’s head of innovation Trevor Maynard said: “As more money flows into the crypto-asset market, losses from hacks are on the rise.
“Nevertheless, cryptocurrency companies have found ways to protect their digital assets from theft and, by working closely with Lloyd’s underwriters, to insure losses that do slip through the net.”