In breif
- Lloyds of London already offers insurance for "cold wallets."
- It is now expanding that to "hot wallets."
- This gives the crypto businesses more options.
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Major insurance firm Lloyds of London is expanding its foothold in the cryptocurrency industry. Having already insured cold wallets—where coins are kept offline in secure vaults—the firm is now turning its hand to internet-connected hot wallets.
Joining forces with crypto-centric insurer Coincover, Lloyd’s underwriter syndicate Atrium aims to extend liability insurance to cryptocurrency wallets held online, as reported by The Times yesterday. The enterprise is designed as a flexible insurance policy— coordinating with the ebb and flow of a volatile market—to combat against rising crypto theft.
This isn’t Lloyds’ first foray into crypto insurance. In 2018, the historied firm insured crypto custodial platform Kingdom Trust. However, unlike this new underwriting, Lloyds insured the custody firm’s cold wallets—a significantly less risky undertaking.
According to blockchain analytic firm Chainalysis, not only are crypto hackers getting more sophisticated, but the number of attacks is on the rise. Within its 2020 crypto crime report, Chainalysis details that hot wallet attacks were a factor in the two most prominent exchange hacks of 2019. In May, Binance was ransacked for a cool $40 million, followed by the Upbit hack in November which observed nearly $50 million in losses.
Crypto industry yearns for protection against hacks
But despite the recent uptick in crypto hacks, attacks and other malicious strikes, Lloyds sees an opportunity.
“There is a growing demand for insurance that can protect cryptocurrency as it becomes increasingly popular,” noted Atrium underwriter Matthew Greaves, speaking to The Times. “It is a testament to Lloyd’s that the market has put together an innovative solution to mitigate these new risks and protect against theft—from physical as well as online vaults—thereby providing customers with peace of mind that their assets are safe.”
In the past, many insurance companies have eschewed crypto wallet protection. For the most part, these firms have been turned off by major headlines conjured in the fallout of multiple crypto hacks. But the billions of dollars in the crypto market are too tempting to avoid forever.