The insurance sector is beginning to dip its toes into the world of cryptocurrency, signaling a pivotal shift toward broader acceptance of digital assets. While still in early stages, major global insurers are launching products designed to protect against crypto theft—responding to rising demand despite the volatility and regulatory uncertainty surrounding digital currencies.
This cautious but strategic move by established financial institutions reflects growing confidence in blockchain technology and highlights the maturing landscape of cryptocurrency infrastructure. As cyber threats escalate and high-profile hacks make headlines, the emergence of specialized insurance solutions marks a significant milestone in crypto’s journey from fringe asset to legitimate financial instrument.
👉 Discover how leading financial institutions are adapting to the digital asset revolution.
Emerging Insurance Products for Cryptocurrency Risks
A small but growing number of insurers now offer coverage for cryptocurrency theft, including XL Catlin, Chubb, and Mitsui Sumitomo Insurance. These policies primarily target exchanges, custodians, and fintech firms managing large volumes of digital assets.
Other insurers are not yet offering formal policies but are actively involved in investigating theft cases involving Bitcoin, Ethereum, and other digital currencies. Though these efforts have flown under the radar, their very existence underscores a critical development: traditional finance is starting to treat crypto as a legitimate risk category worthy of structured protection.
The catalyst for this shift? Billions of dollars lost to hacks, technical failures, and fraud. In one recent incident, Japan’s Coincheck exchange reported a $534 million breach—the largest at the time—highlighting the urgent need for robust security and recovery mechanisms.
Underwriting Challenges in a Data-Scarce Environment
Insurers face a unique challenge: underwriting risk for an industry with limited historical data, rapidly evolving technology, and opaque operational practices. Unlike traditional banking or physical asset protection, crypto insurance must account for digital vulnerabilities like private key exposure, smart contract flaws, and network-level attacks.
Christopher Liu, head of cyber insurance for financial institutions at American International Group (AIG), compares cryptocurrency custody to armored transport services—but in the digital realm. “If something goes wrong, it could be a combination of technical failure, human error, or malicious attack,” he explains. AIG began researching crypto theft back in 2014 and has since developed preliminary policies, though it remains in an exploratory phase.
XL Catlin took a proactive approach by engaging directly with tech firms and potential clients to build internal expertise. Greg Bangs, head of crime insurance in North America, notes that their first task was determining whether a viable product even existed. Today, XL Catlin offers crime insurance with coverage up to $25 million per claim.
👉 See how insurers are leveraging technology to assess next-generation financial risks.
Know Your Customer: The Gatekeeping Role of Brokers
Due diligence is paramount. Insurance brokers play a crucial role in separating compliant, transparent crypto businesses from those operating in gray areas. Jackie Quintal, a financial institutions advisor at Aon Plc, emphasizes that legitimacy starts with transparency.
“If a company hesitates to share information or can’t answer basic compliance questions, they often self-select out,” she says.
The underwriting process for crypto firms is far more rigorous than standard reviews. It includes deep assessments of cybersecurity protocols, storage methods (hot vs. cold wallets), team backgrounds, transaction volumes, and governance structures. This due diligence can take months—reflecting both the complexity and high stakes involved.
Matt Prevost, head of Chubb’s North American cyber product line, observes that many crypto startups underestimate the intensity of insurance scrutiny. “Exchanges and wallet providers didn’t anticipate the level of underwriting rigor required,” he notes.
Cold Storage Preferred: How Insurers Manage Risk Exposure
Not all insurers cover every type of crypto risk. Some, like Great American Insurance Group (a subsidiary of American Financial Group), provide employee theft coverage for companies accepting Bitcoin—but exclude external threats such as hacking.
Additionally, several insurers refuse to cover cryptocurrencies stored online (“hot storage”) due to heightened vulnerability. Instead, they limit coverage to assets held in offline “cold storage” systems, which are far less susceptible to remote attacks.
This aligns with industry best practices. Coinbase, one of the world’s largest exchanges operating across 32 countries, states on its website that less than 2% of customer funds are kept online—and those funds are insured. According to sources familiar with the arrangement, Lloyd’s of London provides this coverage, although the market declined to comment officially.
Lloyd’s has encouraged its syndicates to proceed cautiously, requiring enhanced due diligence for any cryptocurrency-related policies. In recent years, several member companies have developed niche products tailored to digital asset custodians and exchanges.
Cost Barriers and Market Viability Concerns
Despite growing interest, cost remains a barrier—especially for startups and smaller firms. Ty Sagalow, CEO of Innovation Insurance Group (which has been developing crypto-focused policies since 2013), calls current offerings “expensive products that many companies simply can’t afford.”
Annual premiums for $10 million in theft coverage typically run around $200,000—about 2% of the insured amount. In contrast, traditional financial clients often pay 1% or less, depending on risk profiles and claims history.
Another complicating factor is price volatility. While policy limits are usually fixed in fiat currency (protecting insurers from crypto price swings), the actual value of covered assets can fluctuate dramatically over time. For example, a $10 million policy in January 2017 would have protected roughly 10,957 BTC; by early 2018, after Bitcoin’s price surge and subsequent drop, the same limit would cover only about 923 BTC following a hack.
FAQ: Understanding Cryptocurrency Insurance
Q: What does cryptocurrency insurance typically cover?
A: Most policies cover losses from theft due to hacking, employee misconduct, or system breaches—but often exclude hot wallet storage and social engineering scams unless specifically added.
Q: Why don’t more insurers offer crypto coverage?
A: Limited historical loss data, technological complexity, and regulatory uncertainty make risk assessment difficult. Many insurers remain cautious until standards and regulations stabilize.
Q: Are individual investors covered under these policies?
A: Generally no. Most policies protect institutional players like exchanges and custodians. Retail users must rely on platform-level protections or self-custody best practices.
Q: How do insurers verify the security of crypto companies?
A: Through comprehensive audits of encryption methods, multi-signature wallets, access controls, third-party audits, and incident response plans.
Q: Is there a standard pricing model for crypto insurance?
A: Not yet. Pricing varies widely based on custody models, geography, transaction volume, and claims history. Premiums tend to be higher than traditional financial insurance due to perceived risk.
Q: Can insurance prevent crypto hacks?
A: No—insurance is a recovery mechanism, not a preventive tool. Strong security practices remain essential to avoid reliance on claims.
👉 Learn how regulatory clarity could unlock broader adoption of digital asset insurance.
The Road Ahead: Regulation Over Reliance
While insurance provides a safety net, industry leaders argue it shouldn’t be the first line of defense. Cameron Winklevoss, co-founder of Gemini exchange and a registered New York trust company, stresses that regulatory oversight should prevent failures before they happen.
Gemini carries insurance against employee theft and fraud—but not against external cyberattacks. “The focus should be on regulation and operational integrity so we never have to depend on insurance,” Winklevoss told Reuters.
Henry Sanderson of Lloyd’s broker Safeonline believes the entire sector is maturing. “If insurers don’t embrace this now, they’ll miss a major opportunity,” he says.
As institutional interest grows and infrastructure strengthens, cryptocurrency insurance is evolving from experimental niche to essential component of digital finance. Though challenges remain—from pricing and volatility to security verification—the trend is clear: crypto is no longer on the outskirts. It's entering the mainstream—one policy at a time.
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