The wild ride for cryptocurrency investors continues as a variety of factors threaten both the value and the security of investor holdings including both various coins and their derivatives like NFTs. Investor concerns including both direct hacking and theft from exchanges, which are reported on a weekly basis.
With this high level of volatility in mind, it caught my attention when I recently heard that crypto holdings can now be insured against theft from certain exchanges. The insurance industry professional who brought this to my attention is Ahmet Bidav, who works with HNW individuals and their family offices and advisors, and who is the founder of Lux-STR Insurance Brokerage Inc.
Ahmet was kind enough to answer some of the basic questions I had on this issue. While this list certainly isn’t exhaustive, it covers some the key basics I thought investors would be concerned about.
Is there a dollar limit on the size of the portfolio you can insure?
Currently we are insuring up to $1M in limits.
Can you insure multiple wallets with multiple exchanges?
Yes, as long as the exchanges are on of these 4: Coinbase, CoinList, Gemini, Binance US.
Is the coverage limited to certain exchanges?
The limit is at the policy level, so $1M is for the total limit per policyholder (individual/legal entity). In other words, there are no sublimits per exchange.
Is the coverage limited to certain coins?
Yes, currently coverage is afforded to the following 20 coins: Bitcoin, Ethereum, Ripple, Tether, Solana, Cardano, USD Coin, Polkadot, Dogecoin, Avalanche, Shiba Inu, Terra, Wrapped Bitcoin, Litecoin, Uniswap, Polygon, Chainlink, Algorand, Binance Coin, Binance USD
What kind of events does this coverage apply to? Is it only for theft directly from the exchange or can you insure a cold wallet as well?
A. Loss of crypto assets resulting directly from theft of crypto assets being held within an Exchange wallet (whether the crypto was stolen from the exchange hot wallet or cold storage facility)
B. Loss of crypto due to email instructions from an exchange to transfer crypto from your exchange wallet into an unknown wallet.
How soon after the coverage is purchased is it in effect?
There is a 3-day waiting period.
What does the insured have to disclose to the insurer about their accounts to obtain coverage?
The exchange they custody their crypto, and the amount of crypto in each exchange.
What are some of the exclusions that crypto investors should be aware of?
It doesn’t cover for third-party software or hardware wallets, losses due to user error, nor asset depreciation due to market volatility.
Who are the carriers providing this coverage? Are they traditional highly rated insurance carriers or is this a new specialty line offered by one carrier?
Breach Insurance was started by former Liberty Mutual executives. The fronting carrier is Trisura Specialty Insurance (A-) Excellent financial strength rating from A.M. Best and Relm Insurance is the reinsurer.
Are NFTs insurable as well this way?
As an attorney, I don’t sell insurance, so investors with additional questions should contact Ahmet directly at firstname.lastname@example.org