It’s difficult to cover crypto platforms and users.

It’s difficult to cover crypto platforms and users.

According to an insurance executive, a crypto insurance provider will usually assess at least 2,000 factors across 20 different risk areas before even considering insuring a cryptocurrency platform.

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Insurance and crypto executives have told Cointelegraph that crypto insurance providers take a long time to decide whether or not to cover a crypto company. They also said that almost no one offers assurances to individual customers.

Last year saw $3.9 billion stolen from crypto companies, decentralized finance platforms and users, a massive 22% rise from the prior year — and that’s only counting hacks and exploits. Some think 2023 will be worse.

Raymond Zenkich is the president of Evertas Insurance, a cryptocurrency insurance company. He told Cointelegraph it was a complex process to assess the initial risks of a crypto platform.

He said that an initial underwriting — a process of evaluating the risks associated with insuring assets — was performed “based upon a very detailed form” which involved crunching over 2,000 variables spread across 20 different risk areas.

Zenkich said that key management is a significant risk factor.

He said that the dangers don’t stop there. “There are different degrees of hot and cold, each with its own risk profile.”

On April 14, cryptocurrency exchange Bitrue <a href="https://cointelegraph.com/news/crypto-exchange-bitrue-suffers-23m-hack-due-to-hot-wallet-eploit#:~:text=Bitrue%20cryptocurrency%20exchange%20has%20suffered,exploit"%20of%20its%20hot%20wallet. The attackers stole nearly $23,000,000 worth of crypto assets. The hot wallet that was compromised held less than 5 percent of the total funds at the exchange. According to the firm, the other wallets were not affected.

Zenkich stated that, after determining the storage risk level, the company will need to consider thousands of “business technology and operational variables” before calculating the premium.

Once we answer all of the questions, we decide what premium to charge in order to justify the risk.

crypto-insurance providers will not insure people who don’t have assets on an exchange, such as by self-custody.

Adrian Przelozny is the CEO of Independent Reserve in Australia. He said this was because it would be “very difficult” for the customer to prove that they lost the cryptocurrency and not just took it.

Przelozny said that, while the provider insures only assets on the exchange’s platform itself “customers” have “a direct relationship with insurers,” and can “choose to have 100% coverage” for a small charge when signing up.

He said that the insurance contract is long and covers many things, including hackings as well as “thefts caused by our team.”

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A spokesperson for Binance, a cryptocurrency exchange, told Cointelegraph its emergency fund, Secure Asset Fund for Users, is managed by the company.

They said: “It’s a fund owned by Binance that was created in July 2018 for the purpose of protecting users’ interests.”

SAFU will cover any verified loss incurred by an end-user due to a vulnerability in Binance’s security systems or protocols.

Simon Dixon, CEO BnkToTheFuture’s online investment platform, believes that traditional insurers can improve their practices by learning from crypto counterparts.

Smart Contracts offer an opportunity to make traditional insurance more accessible and affordable for all. I am looking forward to watching our industry grow, despite the usual growing pains of this sector.

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