Arch Insurance International, based in London, has authorized a London-based insurer, Evertas, to increase its coverage limit for a single policy to $420 million for Canadians or exchanges, which is the highest in the industry.
The move is a significant boost for the crypto sector tainted by the collapse of major market players like FTX, and should help ease worries about hacks and thefts that have plagued the industry. Currently, only 2 - 3% of global cryptoassets are believed to be insured, Evertas said.
This is the single largest policy that can be approved from one insurance company, said Evertas chief executive officer J. Gdanski.
A lot of other things that you may have found in press releases say, oh you know, $500 million, a billion or whatever. Those programs actually necessitate multiple underwriters to sign off. The $420 million coverage is based on crime-related policies involving the theft of private keys - or codes used to authorize transactions or prove ownership - held by a custodian. Binance and Coinbase Exchange are examples of custodians.
The previous policy limit for Evertas was $5 million.
Evertas is a Lloyd's of London SOLYD.UL coverholder with specialized technical and local knowledge that international insurers rely on to assess or underwrite complex risks, such as crypto. In February last year, Evertas joined Lloyd's of London.
Being a coverholder gave Evertas the authority to write crypto insurance on behalf of Arch, one of Lloyd's syndicate members, one of a group of insurance firms that band together to provide coverage for large risks.
Arch Capital Group, a unit of Arch Capital Group, declined to comment on the story.
The London insurer has also granted Evertas to provide insurance on crypto mining hardware of up to $200 million, which is the largest single policy coverage for the company, Gdanski said. Crypto Miners use these properties to protect their equipment from being destroyed by natural disasters, such as fire, flood, and other natural causes.
The $200 million program is actually quite important because mining operations in particular tend to have very large facilities with a lot of equipment and this larger policy size allows for greater protection, Gdanski said.
The most recent data shows that crypto losses from thefts and hacks reached $400 million in the first quarter of the year, according to a report from blockchain analysis firm TRM Labs. In 2022, about $3.7 billion was lost in crypto losses.
What you're seeing is that very conservative entities the insurance industry is saying we think there's enough here - there's enough of a business and enough demand - to support insuring this new space, Gdanski said.