\n<\/p>\n
As the crypto market crashes<\/a>, some insurance companies are stepping up efforts to exclude coverage for crypto-related risks under a range of insurance policies.<\/p>\n But because crypto is still new, insurers are having a hard time defining and pricing the risk. The lack of a clear regulatory framework also makes it challenging to unambiguously exclude crypto risks from businesses\u2019 insurance policies, potentially leading to losses for insurers, according to insurance lawyers, brokers, and directors.<\/p>\n At the other end of the spectrum, insurers are swimming in regulations.<\/p>\n \u201cIn terms of crypto and cryptocurrencies, the insurance industry is very conservative and heavily regulated,\u201d said Mirjam Bamberger, an executive from AXA Europe.<\/p>\n Nicholas Pappas, an attorney at Reed Smith who represents policyholders, said he has seen crypto-related exclusions in businesses\u2019 cyber, crime, property, and general liability policies this year.<\/p>\n \u201cInsurers are putting in a lot of cryptocurrency or digital asset exclusions, and they\u2019re pretty broad,\u201d Pappas said.<\/p>\n Carriers want to avoid the huge losses and messy underwriting they had with cyber insurance when they jumped in too quickly to sell policies without a sufficient understanding of new risks. Cyber insurers have experienced a 300% increase in losses since 2018, according to Fitch Ratings.<\/p>\n Consequently, cyber insurers have little appetite to cover crypto. All cyber policy renewals this year \u201cwill have a blanket crypto exclusion across the board,\u201d said Luke Speight, director of digital assets at insurance broker Willis Towers Watson. <\/p>\n Some other insurers, even while recognizing the lucrative crypto market\u2019s huge demand for insurance, are letting go of the opportunity to sell the coverage.<\/p>\n \u201cWe have seen insurance companies put blanket crypto exclusions on non-crypto companies\u2019 insurance policies,\u201c James Knox, a regional technology practice leader at broker Aon PLC, said. \u201dSome insurers have a strong mandate not to touch crypto at all\u201c in policies covering directors and officers, errors and omissions, general liability, and property, he said.<\/p>\n Certain insurers, too, get crypto exclusions in their treaties with reinsurers, who provide insurance to carriers, so there is little they can do about it, said Jackie Quintal, a managing director of insurance broker Marsh McLennan.<\/p>\n Crypto is largely unregulated in the US, and most insurance policy forms do not clearly address or exclude crypto-related risks.<\/p>\n But Louisa Weix, a partner at TittmannWeix who advises insurers, said she has seen crime insurers add \u201cvirtual currency and digital asset\u201d exclusions to avoid having to cover hacks and cryptocurrency theft.<\/p>\n Meanwhile, there is uncertainty about how cryptocurrency should be designated, a topic that\u2019s been the subject of some notable decisions from courts and federal agencies.<\/p>\n \u201cThere\u2019s a lack of understanding about what crypto is. Is it a digital asset, security, commodity, investment, property, or is it a scam?\u201d said Edin Imsirovic, associate director at AM Best, a credit rating agency for insurance companies.<\/p>\n In 2014, the IRS said that \u201cvirtual currency\u201d will be taxed as \u201cproperty,\u201d not currency. In 2018, an Ohio court ruled that $16,000 of lost bitcoin is property covered by homeowners insurance. And in 2020, courts in Singapore, the UK, and New Zealand, among others, ruled that cryptocurrency is \u201cproperty.\u201d<\/p>\n The Securities and Exchange Commission, for its part, charged Ripple Labs<\/a> and its executives in 2020 with allegedly raising more than $1.3 billion through an unregistered offering of digital asset securities. The lawsuit, pending in New York, focuses on whether Ripple\u2019s token\u2014XRP\u2014is a security under federal law.<\/p>\nAvoiding Losses<\/h2>\n
Unregulated Risk, Vague Policies<\/h2>\n