American International Group (AIG) has introduced a new insurance product to protect investors in the crowdfunding investment industry.
The new Crowdfunding Fidelity product has been specifically designed to protect investors on equity crowdfunding platforms against issuer fraud.
It will protect individual investors against the theft of issuer assets by issuer directors, officers or general employees which result in a direct loss to the individual investor.
The product will allow the crowdfunding platforms to increase the value that they can offer to the investors.
Crowdfunding platforms allow innovators to realize their ideas and helps retail investors to offer capital for start-ups and growth stage enterprises.
The platforms are mostly used by high net worth individuals and institutional investors such as venture capital funds and private equity firms.
AIG liability and financial lines president Lex Baugh said: "As a sector still in its infancy, equity crowdfunding platforms are only as strong as the confidence they instill in their investors.
"This new product will help provide that confidence and help to support this asset class as it matures."
AIG is currently providing the new product to platforms in the UK and Canada. The policy can be customized to local needs of equity-based crowdfunding platforms, if other countries finalize regulations for companies to raise capital.
Eureeca, an equity crowdfunding platform registered in the UK and based in Dubai, is the first platform that has purchased the new coverage.
Eureeca Co-CEO and founder Chris Thomas said: "The new power of the crowd and the desire to democratize investing throughout the world can unleash great partnerships."
AIG provides property casualty insurance, life insurance, mortgage insurance and retirement products, as well as other financial services in around 100 countries and jurisdictions.
Image: AIG headquarters on 175 Water Street New York City. Photo: courtesy of AIG.