Insurance for assets held in Online Cryptocurrency Wallets

[Henri Cartier]

Lloyd’s, insurance and reinsurance market launched an innovative insurance solution for cryptocurrency wallets on March 2. This insurance can be against theft and hacks on the online crypto-wallets.

Lloyd’s is a 334-year-old organization that insures and spreads risks of businesses, organizations, and individuals.

Recently, in the news, they reported about the launch of a Cryptocurrency wallet insurance for Coincover.

The insurance policy offers flexible insurance limits from as little as £1,000 and the limit is dynamic and the price variation of the crypto assets drives the limit.

It also protects the insurer against the volatility of the crypto assets. In case of an unfortunate event, the insurer will receive the compensation amount for the harm or loss.

Some of the insurers of Lloyd’s are Coincover, TMK, and Markel.

Website: https://www.lloyds.com/
Lloyd's around the world: Africa & Middle-East, the Americas, Asia & Pacific, and Europe

[Disclaimer]: I am not related/part of Lloyd's.

>> If we can have insurance for our assets on the online crypto wallets, then it would be good right? Even if we lose our assets due to malicious hack or theft, we will have insurance that will protect us from the complete loss. What is your opinion on this?


Source: Insurance Giant Lloyd’s Launches a New Cryptocurrency Insurance Product

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Ok… but this solution is specifically for Coincover’s customers using Coincover’s platform to make (crypto) investments. It makes sense in their business model, although I couldn’t make out whether Coincover covers the insurance cost, or whether it’s the end customer that does (either way, the customer is going to pay). It’s probably aimed at attracting more conservative customers, that are given some type of guarantees through the policy (I have not dissected it in depth).

It’s not really a general practice (although I figure some Exchanges do have part of the assets coverted from hacks), so the collective "we" is really restricted to "their" customers.

[mk4]

Ehh.. having insurance is almost always good, though would it be worth it with them having the power to lock you out of your funds? I personally don't think so. There's a reason why a good number of people aren't fans of custodial wallets regardless how good the service is.

[o_e_l_e_o]

So the insurance will cover you if the exchange's security is sub-par and they end up being hacked.

Since they are insuring the exchange's hot wallets, and not a wallet the customer control, it will offer no cover whatsoever if the exchange chooses to restrict your access to your coins. So if they lock or freeze your account, place any restrictions on it, spring unannounced KYC requirements on you, decide they no longer want to serve your country, decide your activity is "shady", decide they don't like where you deposit your bitcoin from or where you withdraw your bitcoin to, etc., etc., then this insurance provides absolutely no cover whatsoever.

Why place your coins in a wallet of unknown security which is prone to being targeted by attackers, rogue employees, or exit scammed, even if it is covered by insurance, when you can just cut out the middle man altogether and store your coins yourself?

Every development like this moves exchanges and web wallets one step closer to being fiat banks. We shouldn't be encouraging this, we should encouraging users to withdraw their coins from these third party platforms.

[bitmover]

Imo the insurance only makes sense for exchanges, like binance.

Online wallets are very insecure and funds are often hacked or lost. This makes no sense because of their poor security,  due to convenience.  It is a trade off, which is worth for the people who use those services.

Paying to make an insurance in an online wallet is a waste of money
Just move your funds to a safer wallet for free.

[Theb]

The website of Coincover shows more explanation on how the insurance works and what type of attacks/losses is covered.

Ehh.. having insurance is almost always good, though would it be worth it with them having the power to lock you out of your funds? I personally don't think so. There's a reason why a good number of people aren't fans of custodial wallets regardless how good the service is.

I did a little digging and under there "Is Coincover safe to use?" tab it turns out they don't have any kind of control with your funds.

Coincover is unable to access or manage funds within your BitGo wallets. Wallet holders have full legal title and ownership with the ability to move funds in and out of their wallets as they so choose

So basically what Lloyd's (The Society of Lloyd's) is offering is the insurance coverage and Coincover is some kind of vehicle for their insurance. Coincover itself aside from offering the buying and selling of crypto has other services such as managing the inheritance of your crypto holdings to even the recovery of your private keys. Now since both are U.K. based companies I would be expecting this kind of insurance and service to be a hit for their domestic market given that UK is one of the most open countries when it comes to crypto adoption. Not to mention that a hefty amount of scams are targeted in that country this insurance alone would give their clients a peace of mine when it comes to crypto transactions and possible hacks from their devices.

[Henri Cartier]

Ok… but this solution is specifically for Coincover’s customers using Coincover’s platform to make (crypto) investments. It makes sense in their business model, although I couldn’t make out whether Coincover covers the insurance cost, or whether it’s the end customer that does (either way, the customer is going to pay). It’s probably aimed at attracting more conservative customers, that are given some type of guarantees through the policy (I have not dissected it in depth).

It’s not really a general practice (although I figure some Exchanges do have part of the assets coverted from hacks), so the collective "we" is really restricted to "their" customers.

Yes, it is for Coincover customers.

They offer insurance for the users who held their coins in the Bitgo wallet with Coincover. Users will have complete ownership of their crypto assets. Coincover will pay the claims to the cover limit their user chooses.

My point was, what if we have insurance for all our crypto assets that are held on any exchange? Like Coincover, other exchanges also should provide insurance for our crypto assets. So that we will not lose our assets completely.

[OgNasty]

If history is any guide, any insurance company offering this service for individuals wouldn’t be in business for long.

[figmentofmyass]

If history is any guide, any insurance company offering this service for individuals wouldn’t be in business for long.

i can't see this taking off with individuals. these kind of insurance policies would require certain corporate/legal protections and a vetted, hardened security process. lloyd’s isn't handing out cryptocurrency policies to any chump off the street.

coinbase or bitgo or that caliber of company is a different story. coinbase has held an insurance policy on their hot wallets for years now. i assume it's expensive as hell since they're only willing to insure "less than 2% of customer funds". they haven't been hacked yet (that we know of) so their insurer (aon? lloyd’s?) must be raking it in.