Gemini Trust Company LLC, a cryptocurrency exchange and custodian, has set up a captive insurance company in Bermuda, with support from re/insurance brokers Marsh and Aon.
Licensed by the Bermuda Monetary Authority (BMA), the captive will provide insurance for customers of Gemini Custody, the crypto cold storage service by Gemini.
The solution will give Gemini Custody $200 million in insurance coverage, which it claims will be the largest limit of insurance coverage purchased by any crypto custodian.
Additionally, Gemini has told us that, while the captive will initially be used solely for its own insurance needs, in future it may look to leverage the captive structure to support the procurement of reinsurance-like capacity to back crypto custody insurance for third parties.
“Insurance is one of the main barriers to crypto mass adoption,” said Cameron Winklevoss, President of Gemini. “Gemini has created a captive insurance company to address this.”
“Obtaining meaningful insurance in the crypto industry remains a challenge, and our captive will help to increase our insurance capacity and move the industry forward.”
Gemini worked with Aon to incorporate the captive – called Nakamoto – in Bermuda. With Aon as its captive manager, Gemini hopes to be able to tap into broader insurance and reinsurance markets to obtain greater amounts of capacity at lower costs.
Additionally, Marsh’s Digital Asset Risk Transfer (DART) team brokered excess insurance from the commercial markets to provide a custody insurance solution.
“A captive really broadens Gemini’s access to reinsurance markets which is something they would not have had access to before,” Sarah Downey is reported to have said, who co-leads the digital asset risk transfer team at Marsh. “So in a way, it gives them the opportunity to tap into more coverage and potentially a better rate.”
“Currently, the crypto industry lacks insurance coverage similar to that available in traditional financial markets,” added Yusuf Hussain, Head of Risk of Gemini. “Gemini recognized this gap and collaborated with two of the world’s largest insurance brokers, Aon and Marsh, to solve for this.”
In July last year, Aon was also reported to be exploring plans to set up a captive insurer with Coinbase, a San Francisco-based digital currency exchange, that would insure risks related to crypto-currencies.