FILE PHOTO: Representations of cryptocurrencies are seen in this illustration, August 10, 2022. REUTERS/Dado Ruvic/Illustration
NEW YORK (Reuters) - London-based Arch Insurance International has authorized cryptocurrency insurer Evertas to increase the coverage limit for a single policy to $420 million for custodians or exchanges in what the U.S firm said is the highest in the industry.
The move is a big boost for a crypto sector tainted by the collapse of major market players such as FTX and should help ease concerns on 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," Evertas chief executive officer J. Gdanski told Reuters.
"A lot of other things that you may have found in press releases say like, oh you know, $500 million, a billion or whatever. Those are programs that actually require multiple underwriters to sign off."
The $420 million coverage applies to crime-related policies involving the theft of private keys - or codes used to authorize transactions or prove ownership - held by a custodian. Examples of custodians are Coinbase Exchange and Binance.
The previous single policy limit for Evertas was $5 million.
Evertas is a Lloyd's of London [SOLYD.UL] "coverholder", an insurance firm with specialized technical or local knowledge that international insurers rely on to assess or underwrite complex risks, such as crypto. It only writes insurance for custodians with private keys.
Evertas joined the Lloyd's of London marketplace in February last year.
Being a coverholder gave Evertas the authority to write crypto insurance on behalf of Arch, one of Lloyd's syndicate members, part of a group of insurance entities that band together to provide coverage for large risks.
Arch, which is a unit of Arch Capital Group, declined to comment for this story.
The London insurer has also authorized Evertas to provide insurance on crypto mining hardware of up to $200 million, also the largest single policy coverage, Gdanski said. Those are property policies used by crypto miners to protect their mining equipment from being destroyed by damage from fire, flood, and other natural causes.
"Having a $200 million program is actually quite important because mining operations in particular they tend to have very large facilities with a lot of equipment and this larger policy size allows for greater protection," Gdanski added.
The latest data showed 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. That followed about $3.7 billion in crypto losses in 2022.
"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.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Alden Bentley and Mark Potter)
