Digital asset opportunities fuel insurer competition

While several traditional insurers have recently entered the market, much of the capacity comes from the growing appetite of other traditional insurers already serving the digital asset market and from newer insurers specifically focused on the digital asset ecosystem. For most buyers, pricing is generally decreasing for all forms of coverage and insurers are being more flexible on terms and conditions, including for regulatory coverage.

Crime and custody insurers are eager to grow, offering coverage more comparable to what is available in the traditional financial institution bond or commercial crime markets, and expanding coverage for key risks, such as extortion. Underwriting remains stringent, but the amount of interest and capacity offering computer crime coverage continues to increase — a plus for digital asset firms. Insurers, for example, are revising policies to better address the complexities of digital asset storage, moving beyond the simplistic distinction between “hot” and “cold.”

London-based insurers, meanwhile, are showing greater interest in writing D&O coverage for digital asset firms, which U.S. insurers were already relatively comfortable offering. D&O programs now offer broader Side C entity coverage than before, and insurers are becoming more willing to narrow or remove exclusions for cyber risks and theft of assets in custody.

Cyber and technology errors and omissions (E&O) insurers are offering more meaningful solutions for the ecosystem. For example, some tech E&O insurers are increasingly offering coverage for damages that equate to the loss of asset value, which historically has been excluded or limited under tech E&O policies.

With regulatory oversight of digital assets solidifying — particularly in Europe and Asia — insurers are asking more questions about what companies are doing to comply with new rules. Underwriters are specifically inquiring about licensing requirements, where applicable, along with the steps companies are taking to protect the safety of assets under their control. Insurers are asking specific questions about risk management protocols, including what other forms of insurance coverage companies are purchasing. Underwriters are also probing companies about how they would have responded to various security events involving other digital asset market participants.

The regulatory environment in the U.S. is less mature, but there is great anticipation that the Trump administration will take a more friendly approach to digital assets, as the president promised on the campaign trail. One positive change that has already taken place is the Securities and Exchange Commission’s (SEC) rescission of Staff Accounting Bulletin 121, which was previously published under the Biden administration in 2022 and was seen as a significant hurdle to banking industry investment in digital assets.

While we expect to see substantial positive activity from the Trump administration, some uncertainty remains both in the U.S. and internationally. Individual states may take a more hands-on approach to digital assets as the federal government looks to loosen regulation. Meanwhile, many of the laws that have been enacted elsewhere have not yet been tested and could ultimately be revised or reworked.

Claim trends for digital asset firms are generally benign. Crime and custody-related claims activity is limited, and D&O and other management liability claims are fairly similar to those in other industries. Much of the sector’s claims activity is tied to regulation or bankruptcy.

Digital asset buyers should expect to see a competitive market for the foreseeable future, although conditions for the industry will be partially driven by trends in the broader insurance marketplace. In this environment, it’s essential that digital asset firms work with experienced brokers that understand the nature of their business and their most critical risks. They should also ensure they are working with insurers that can be relied on in the event of a sizable loss or claim.