Cryptocurrency initiative introduced by LSM
The European crypto market is witnessing a surge in interest from institutional investors, with traditional sector businesses increasingly engaging in the crypto space. This shift in perception, which began in the 2020s, continues despite recent market fluctuations.
Two insurance providers, Marsh and Liberty Specialty Markets (LSM), have recently launched new insurance products tailored for crypto-asset service providers (CASPs) operating within the European Union.
Marsh's new offering, MiCAssure, is a proprietary insurance solution designed for custodians, exchanges, and administrators in the crypto sector. Unlike Marsh's MiCAssure product, LSM's new product does not mention coverage limits of up to €3 million, but it is aimed at a wide range of providers, including traditional banks, asset managers, and blockchain startups. The product offers coverage limits of up to €3 million and extends LSM's existing range, which includes bankers' blanket bonds, professional liability, D&O, among others.
Daylight, the first product from a Lloyd's of London insurance broker, is aimed at digital asset businesses such as tokenisation platforms, miners, custodians, and blockchain developers. Unlike Daylight, LSM's new insurance product is not mentioned to cover risks related to professional liability, management errors, theft, and fraud.
The launch of these products is in response to increased demand from the financial sector due to rapid changes in macroeconomics, regulation, and technology. Jorge Chao, head of financial institutions at LSM Europe, stated that the product was meticulously created to address the complex risks associated with the crypto revolution. The product was developed in collaboration with LSM's cyber and technology teams to close knowledge gaps that can hinder crypto insurance propositions.
The regulatory background under the EU's Markets in Crypto-Assets (MiCA) directive is significant. Starting January 2025, CASPs must be licensed and document governance structures, including proof of capital adequacy and compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) rules. This suggests that insurance solutions, if adopted, would need to align with stringent prudential and operational requirements defined by the EU.
However, there are no explicit references to crypto-specific insurance products in the EU regulatory texts. The regulatory focus is currently on licensing, capital requirements, and operational safeguards. The high risk weights and capital requirements might make insurance providers cautious. Insurance solutions for CASPs are likely to include niche crypto custody insurance policies underwritten by specialized insurers, covering risks such as theft, hacking, and operational failures.
In summary, the current state in the EU is that insurance solutions for CASPs are primarily private, specialized insurance policies tailored to cover operational and custodial risks. These are influenced by but not explicitly regulated under MiCA or related frameworks. Providers interested in crypto insurance should prepare for complex underwriting processes due to high prudential risk weights and evolving regulatory scrutiny and may benefit from consulting specialized insurers offering policies for crypto custody and operational risk.
- The surge in interest from institutional investors in the European crypto market, coupled with the increasing engagement of traditional businesses, has led to a need for specialized insurance products for crypto-asset service providers (CASPs).
- business, finance, technology, events - Against the backdrop of rapid changes in macroeconomics, regulation, and technology, insurance providers such as Marsh, Liberty Specialty Markets (LSM), and Daylight have launched insurance products tailored for CASPs, responding to the increased demand from the financial sector.
