The number of hacking attacks on various companies, irrespective of their business have been on a rise across the world. The increasing frequency and the extent of such attacks have driven the costs of obtaining a cyber insurance cover upwards. The premium for such insurance policies vary from business to business, based on the factor of risk associated with them.
Among all the businesses, banking, finance and especially cryptocurrency based businesses are the worst affected due to drastic increase in rates and deductibles. Over that, insurers in some cases are also setting a cap to coverage amount.
What is Cyber Insurance?
Cyber insurance is a product of changing times, these categories are relatively new in the insurance industry. Cyber insurance products offers protection to individuals and businesses from any risk/s and losses arising from the internet or computer and informational technology products.
Why Cyber Insurance?
In today’s world, most of the work happens on electronic computing devices over the internet. Lot of information and assets are stored in electronic format on electronic media which are susceptible to unauthorized access by cyber criminals looking to make a quick buck either by stealing the assets or information which they can use to blackmail those it belongs to or sell it to the highest bidder. Any event like that can result in huge losses in terms of money, credibility, business etc. to the targeted individual or organization. In case of lawsuits, they may have to pay damages caused to the clients due to loss of information or assets. Cyber insurance covers any such costs or damages during such circumstances. There are variety of cyber insurance policies available. Few insurers offer only first party coverage, others third party coverage and there are some who offer both.
Cyber Insurance and Bitcoin Industry
Bitcoin industry is one of the industry which is in a dire need of cyber insurance coverage these days. While there are few bitcoin companies which are already operating under insurance coverage. For example, BitPay, Xapo, Circle, Gemini, Coinbase all have their bitcoin assets covered by reputed insurers. However, there are many smaller exchanges and payment processors who don’t have such coverage yet due to various reasons. Sometimes it depends on rules and regulations applicable to certain jurisdictions or the costs involved in obtaining cyber insurance coverage etc.
Reports of bitcoin platforms coming under attack by hackers has been a regular occurrence in the past few years. Some of the big players in today’s bitcoin market like BitPay and Bitstamp have reported hacking incidents in the past where hackers had stolen millions of dollars in bitcoin. Last week Purse.io customers also reported loss of few bitcoins, which was later acknowledged by the company. Most of the times, bitcoins held by these companies do not belong to them but to their customers and the company will be responsible for them. In case these bitcoins get stolen while in company’s possession, the company will be liable to its customers and will be forced to compensate or make up for their losses. In such cases, having a cyber insurance comes in handy.
Bitcoin industry has been classified as a high risk sector by insurance companies. Lloyds’ Emerging Risk Report – 2015 published by Lloyds, the UK based banking and financial institution states that the risk associated with bitcoin and bitcoin businesses is here to stay. It also mentions that bitcoin sector will benefit from insurance and may also help it evolve.
Lloyds is one among a handful of companies that has offered/offering insurance to bitcoin sector. Others include Bitcoin Financial Group, Massachusetts Bay Insurance Company, Great American Insurance Group and more.
While the insurance companies are making a killing out of the absolute requirement of cyber insurance policies for bitcoin and other financial operators across the world, they are also exposing themselves to a lot of risk. However, that should not be the case in the coming years as cyber security is getting stronger every passing day and bitcoin companies are constantly learning from others’ mistakes while keeping up with current industry standards.
Download : Lloyd's Emerging Risk Report - 2015