Technology
Digital Assets Storage Gets New Insurance Cover

Aon Partners has struck a deal with an Israeli security firm to insure safe storage of crypto assets. The pandemic has raised interest in using digital currencies to hedge against traditional assets as well as raising new concerns about its popularity among money launderers.
Tel Aviv based GK8, a technology business that safeguards digital assets, has struck a deal with Aon UK to provide up to $500 million in insurance coverage for clients using the firm’s cryptocurrency storage technology.
The technology underwritten by Aon allows financial institutions to access digital assets and related information securely by enabling the institution to execute the entire asset management process, including sending a signed transaction to the blockchain, with no direct or indirect Internet connection. Crypto assets are stored by the firm in so-called cold wallets when owners choose to take the assets completely offline.
The insurance industry is playing a major role as companies move into new phases of managing a return to business. Some would argue that the sector has not covered itself in glory by protecting companies from the worst of the shutdown measures. It was largely silent in response to enquiries from this news service back in March and April when businesses were feeling the most ragged about what course to steer.
But with changed circumstances come new and novel partnerships, and this latest insurance policy to protect crypto assets illustrates how companies are evaluating risk as never before. From an investment standpoint, it also suggests that digital assets such as bitcoin are coming back in fashion as managers weigh the resilience of traditional currencies and markets through the upheaval. This is somewhat reflected in bitcoin rising by around 30 per cent since the start of the year.
DeVere Group head Nigel Green, a heavy proponent of cryptocurrencies, suggested that the rise stems from massive money printing at central banks which is devaluing traditional currencies and boosting other stores such as bitcoin and gold. He also sees digital money as “a legitimate hedge” against longer-term inflation concerns.
In terms of provisioning from Aon, the firm said the policy is designed to cover internal and external theft as well as loss, damage, or destruction of crypto assets stored in a cold wallet.
Tom Davis, client director of Aon UK, said the firm has "worked hard to demonstrate the validity of GK8’s solution to insurers so that the company’s clients can benefit from pre-negotiated insurance coverage to protect the digital assets in their care, custody, or control.” The polcy is underwritten by Arch Underwriting, which is part of the Lloyd’s insurance market. The accountancy and advisory group BDO reported that money lost to cryptocurrency fraud in the UK alone reached £24.3 million in 2019, a rise of 256 per cent on the previous year, with BDO warning that the surge in losses “shows the inherent dangers that arise when innovation outpaces regulation.”
GKB said its cold-wallet technology is used by clients managing around $1 billion in digital assets. The company was co-founded in 2018 by Lior Lamesh and CTO Shahar Shamai. The two previously worked for the Israeli State protecting strategic assets against cyber-threats.
“Often, we see people purchase an insurance policy and then hold in the aggregate funds well above the limit of that policy; so for us, it was an important guarantee that when a customer is onboarded to our platform, the full value of their assets is insured,” Lamesh explained.
From adversity comes crime
The pandemic more generally has been a gift for cybercriminals.
At last week’s virtual industry gathering of PIMFA members, Terry Wilson,
global partnership officer at Global Cyber
Alliance, warned of how much organised crime was changing.
“It is still very business-like, but it’s going after the
‘low-hanging fruit’ as well as the big hits. And the low hanging
fruit is you, the person working from home,” he said.
Wilson said that investment fraud had rocketed since lockdown started, with organised crime groups targeting people and businesses. He said firms could be victims of ransomware orchestrated by groups who were so skillful that security professionals were now being taught by police how to negotiate with them.
Another report yesterday from online security firm Atlas VPN said that blackmail and ransomware attacks were up by 144 per cent in 2019 and over half of those organisations paid a ransom to settle. Its research also revealed that 66 per cent of companies that paid the ransom were not able to retrieve their data. Business professionals told the firm that lack of cybersecurity training, not having skilled employees, and falling for phishing attacks were the most common cyber-incident causes.
Companies are facing far greater scrutiny from insurers in return for how they are going about securing remote working practices, and cyber insurance cover is expected to rise even more. Fitch ratings agency reported that the cost of cyber insurance was up by around 50 per cent last year. Companies are also trying to stay ahead of GDPR regulations in Europe and California's tough Consumer Privacy Act as two examples that carry heavy penalties for data breaches.
Earlier this year the FBI warned of crypto-related scams on the rise noting that “many traditional financial crimes and money laundering schemes are now orchestrated via cryptocurrencies.” The Better Business Bureau in the US has also flagged crypto-related fraud as a higher risk than other types of fraud, including payments fraud.