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Arch, Marsh collaborate on insurance solution for digital assets

18th September 2019 - Author: Charlie Wood

Arch Insurance UK, a division of Arch Insurance International, has partnered with global re/insurance brokerage Marsh on a new solution designed to protect digital asset private keys held in traditional vault facilities.

cryptoA private key, in this context, is essentially a string of numbers and letters that leads to a digital “wallet” of digital assets such as cryptocurrencies, identifying the rightful owner.

You need both a public and private key to access a wallet and confirm a transaction or purchase and blockchain is designed to automatically approve any transaction where the public and private keys match.

This new solution, named Blue Vault, brings together companies dedicated to providing insurance coverage for digital asset risks, and is the first insurance solution of its kind to be placed in the specie insurance market.

Blue Vault is backed by syndicates Arch 2012 and Canopius 4444, as well as other syndicates and underwriters at Lloyd’s of London.

Available globally, Blue Vault provides limits of up to $150 million and covers the loss of digital assets due to internal and external theft, including employee collusion, and the physical damage or destruction of private keys.

“When it comes to the critical risk around the generation and storage of digital assets, it is not just the way sensitive material is stored, but a complete and detailed understanding of the entire life cycle of the private keys,” said James Croome, Arch’s Vice President of Fine Art and Specie.

“A breach at any stage could cause a financial loss for our clients, so it is the secure generation, transfer and storage of knowledge, not simply the possession of data, that is our paramount underwriting consideration.

“The importance of this distinction cannot be overestimated and our insurance policy wording was very deliberately constructed to manage this risk.”

With Blue Vault, custodians of digital assets can access a solution which enables them to transfer digital asset storage risks through the life cycle of private key management and storage.

“This is a significant step forward in digital asset insurance,” said Ankur Kacker, Vice President and Specie expert on Marsh’s Digital Asset Risk Transfer team.

“The secure storage of digital assets will continue to evolve as the regulatory landscape for this new asset class becomes clearer and financial institutions increasingly expect insurance to cover digital asset exposures.”

Philip Turner, Head of Specie at Canopius, added, “In the ever-evolving world of crypto, possession of the private key is as good as having the key to a physical vault and thus full access to all of its contents.

“Blue Vault offers an insurance solution for the safekeeping of the private key but only after a stringent and comprehensive underwriting process is completed. No two risks are the same, so every submission is thoroughly scrutinised before we proceed.”

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