The drastic crash in the crypto market could lead to insurers speed up rewriting policies to reduce exposure to claims.
Following the crypto rout, which has seen prices of major cryptocurrencies plummeting and wiped out billions of dollars from the market, insurers will likely review or amend policy wordings to avoid indirectly insuring losses from insureds involved in crypto, law firm RPC said.
James Wickes, a Partner at RPC, said, “The relatively small number of insurers currently active in the crypto asset insurance space are likely to be keen to review the fine print on policy wordings to limit potential exposure from the volatility of the Crypto markets, as demonstrated by the recent crash.”
Policy amendments could likely include more use of virtual currency exclusions which would prevent policyholders from making claims on any crypto losses.
Theft is the crypto-related risk most readily insured. There are risks that investors misunderstand the scope of the insurance.
“The insurance market for these assets is in its infancy and it remains to be seen whether a sufficient body of insurance carriers will be prepared to provide enough capacity to meet the demand and how brave the market will be to extend coverage beyond the traditional theft risk,” Wickes said.