In Hong Kong, search for ‘cyber theft’ insurance stumps aspiring cryptocurrency exchanges
- For cryptocurrency exchanges and custodians, complying with Hong Kong’s new rule on insurance is a costly challenge
- Few speciality insurers willing to underwrite against theft and hacking due to high risks
Hong Kong cryptocurrency exchanges and custodians are seeking out insurance to cover the risks of hacking and theft, in an effort to comply with future regulation by the city’s securities watchdog to provide full protection for client assets.
However, finding an insurer that will underwrite the needed policies and provide the high level of proposed coverage set out by the Securities and Futures Commission (SFC) has proven to be a challenge for the emerging industry, according to industry players.
The high cost, as well as limits on the coverage provided, not to mention the reluctance of some insurance companies to underwrite against risks that are difficult to measure and anticipate, were among the hurdles in complying with the SFC’s proposed rules, industry players said.
Most cybersecurity insurance coverage is written by the speciality insurance market in London, although a number of companies in Asia are beginning to enter the niche market.
“The number of insurers and reinsurers that are willing to underwrite cryptocurrency cybersecurity risk is extremely narrow. The amount of available coverage capacity today is under US$1 billion per transaction,” said Murray Wood, Asia head of financial specialities at Aon.