Cryptocurrencies and insurers: 5 trends for 2021

Interest in the digital asset space is growing. However, management liability insurers have been hesitant to offer competitively priced capacity to companies dealing with digital assets.

Last year, the pockets of insurers in the United States and the United Kingdom offered coverage to digital asset companies. But the cost tends to be high, the breadth of coverage is somewhat limited, and the process can be lengthy. Some companies formed captive insurers to address the limitations of the commercial insurance markets.

As insurers continue to learn more about this space, their offerings will change. Here are five trends that companies working with digital assets should watch in 2021.

Increase in regulations
Whether in the form of new rules or more clarity on existing ones, there is a global need for security around digital assets, so we expect more regulation in 2021. For the subscriber community, more regulatory certainty means a higher level of security. comfort by offering coverage.

A market in transition
Commercial insurance markets in general, and financial and professional markets in particular, are in a state of transition and becoming more challenging, with many buyers seeing rate hikes and tighter coverage. This transition is likely to affect crypto insurance, but since the digital asset insurance space has always been especially challenging, we are cautiously optimistic that the impact will be limited.

More demand for solutions
Many digital asset companies have been forced to purchase insurance for marketing purposes and to attract experienced directors and officers. In 2021, we expect insurance purchases to also be driven by:

Digital asset adoption by financial institutions and the need for hedging to reflect new exposures.
Greater use of external custodians and the requirement that they be insured.
Emphasis on consumer protection from regulators and clients.
The expected result of these trends is an increased demand for digital asset insurance solutions. Also, the adoption of digital assets by financial institutions could make commercial insurers more willing to provide capacity.
Crypto maturity
Insurers base their underwriting decisions, in large part, on data and history. As the young crypto market continues to mature, subscribers will likely feel more comfortable offering coverage in the space.

Testing an untested market
Despite some highly publicized hacks involving cryptocurrencies, the commercial crime and species markets remain relatively untested in the digital asset space. Some insurers believe that a small, controlled hack that tests how coverages work is necessary to make insurers comfortable with their offer. As the purchase of coverage in this space expands and more policies are offered, the greater the likelihood that an event will test coverage.

Blockchain technology and digital assets offer opportunities to organizations, including the possibility of creating new business models and improving existing ones. Since insurance coverage remains essential to the growth and development of any business, Marsh’s Digital Asset Risk Transfer (DART) team remains optimistic that the above trends will lead to an increase in comfort level. of the commercial insurance market and their willingness to actively participate in this space