It turns out that insuring users and crypto platforms is quite difficult

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Crypto insurance providers spend an inordinate amount of time judging whether to provide cover to a crypto company, and almost none of them offer insurance to individuals, crypto officials tell Cointelegraph. insurance and cryptography.

Last year $3.9 billion was stolen from crypto companies, decentralized financial platforms and users, a massive 22% increase over the previous year and that’s only counting hacks and exploits. Some think 2023 could be even worse.

Raymond Zenkich, president of cryptocurrency insurance company Evertas, told Cointelegraph that it is a complicated process to initially assess the risks of a crypto platform.

He explained that initially an underwriting of the asset insurance risk assessment and analysis process is carried out based on a very detailed application form which involves analyzing 2,000 variables in 20 risk areas. .

A significant risk factor is key management: whether keys are stored in hot, hot or cold wallets, Zenkich noted.

He added that it doesn’t stop there, as there are several gradations of warm and hot, each with its own risk profile.

On April 14, cryptocurrency exchange Bitrue suffered a hot wallet exploit, with attackers stealing nearly $23 million worth of crypto assets. The affected active wallet held less than 5% of the overall exchange funds, and the remaining wallets were not compromised,” according to the firm.

Zenkich explained that after determining the level of storage risk, the company will then need to look at thousands of “business, technology, and operational variables, before it can determine how much premium to charge, stating:

Once we have the answers to all applicable questions, we determine the type of premium we would need to charge to justify taking the risk.

That being said, crypto insurance providers are generally unwilling to insure people who do not hold assets on an exchange, such as through self-custody or other means.

Adrian Przelozny, CEO of the Australian Crypto Exchange Independent Reserve, said this was because it would be very difficult for a customer to prove to the insurance provider that they actually lost the crypto and didn’t. simply taken himself.

Przelozny explained that while the provider only insures the assets on the exchange itself, its clients have a direct relationship with the insurer and can choose to have 100% insurance coverage, for a small fee upon registration.

He added that it is a long insurance contract with many events covered, from hacking to theft caused by our team.

Related: Can You Recover Stolen Bitcoins From Crypto Scams?

Meanwhile, a spokesperson for cryptocurrency exchange Binance told Cointelegraph that its emergency insurance fund, the Secure Asset Fund for Users (SAFU), is managed internally.

It is a fund owned by Binance [that] was created in July 2018 to protect the interests of users, they said.

A verified loss suffered by a user due to a vulnerability or other deficiency in Binances’ security systems and/or security protocols would be covered by SAFU, the spokesperson said.

However, Simon Dixon, CEO of online investment platform BnkToTheFuture, thinks there are things traditional insurers can learn from their crypto counterparts to improve their practices.

There is an opportunity to improve traditional insurance with smart contracts and make it more accessible to everyone, which I look forward to seeing grow as an industry, with the usual growth pains of our industry.

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