Why is it so difficult to obtain coverage? There are several reasons:

Lack of data and familiarity

Cryptocurrency is new and doesn't have a performance or actuarial track record, making it inherently difficult to assess and price risk. When insuring an asset like a home or automobile, insurers have an immense amount of historical data that predicts the likelihood of loss. But because crypto is so new, it's nearly impossible for an insurer to predict the likelihood of a hacker breaking into someone's private wallet and stealing crypto coins, for instance.

Regulatory uncertainty

The regulatory landscape is anything but settled. The U.S. Securities and Exchange Commission has proposed a comprehensive, 654-page plan aimed at regulating Treasury markets platforms that will likely include cryptocurrency trading. Insurers understandably see what the crypto regulations will entail and assess their potential impact.

Price volatility

Cryptocurrency has been among the most volatile of assets, whether it's the price swings of popular forms such as Bitcoin or accounting for foreign exchange ups and downs. It's extraordinarily difficult to assess insurance pricing when there's major swings in the price of the underlying asset.

Concentration risk

There are few, well-recognized crypto-custodial operations, heightening concentration risk, with hackers seeing easy targets with large potential payoffs. Carriers are reticent to insure markets in which a single entity is such an enticing target.

Misperceptions regarding costs

Adding to all this is a major disconnect between the perception of how much crypto insurance premiums should cost and the insurers' views of appropriate pricing for products such as directors and officers coverage. Insurance pricing is significantly higher than many people are willing or can pay, leaving many cryptocurrency companies and investors uninsured and fully exposed to risk.

Lack of data and familiarity

Regulatory uncertainty

Price volatility

Concentration risk

Misperceptions regarding costs

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The reasons it's so hard to insure cryptocurrency operations

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