Onedegree, a virtual insurer based in Hong Kong, will provide insurance services for digital assets as part of a partnership with a local cryptocurrency exchange. By working together, the two firms hope to alleviate concerns discouraging potential investors from entering the crypto market.
Onedegree to Underwrite Insurance Policies for Crypto Assets
Hong Kong has several licensed providers of virtual insurance services and one of them, Onedegree, will now offer up to $100 million in coverage to Hkbitex, a crypto trading platform operating in the global financial hub. The two companies have teamed up to protect clients’ cryptocurrencies entrusted to the exchange against risks such as theft and hacking.
According to a report by the South China Morning Post on Thursday, Onedegree becomes the first insurer to underwrite insurance policies for crypto assets in Asia while few companies around the world offer this kind of service. The available coverage, the publication revealed quoting industry sources, has been estimated at under $1 billion per transaction.
At the same time, “less than 1 per cent of the companies that are interested in buying cryptocurrency insurance policies would be eligible for such coverage,” Becky Tam, Onedegree’s chief risk officer, pointed out. Her company now wants to share its risk management framework and underwriting standards with others in the sector as well as with regulators, so that crypto insurance offerings increase and attract reinsurers.
The announcement by Onedegree and Hkbitex comes after bitcoin (BTC), the cryptocurrency with the largest market cap, reached an all-time high (ATH) of over $68,500 per coin this week, bringing the total value of the crypto economy to more than $3 trillion. A new ATH has since been attained at $69K. The partners will target institutional investors wary of entering the space due to the risks associated with digital assets.
Hkbitex’s co-founder Ken Lo remarked that the crypto industry in China’s special administrative region should now try to attract more institutions into crypto assets. “With over 1,800 licensed asset managers, Hong Kong is home to over $3 trillion in assets under management. We want to help asset managers enter this market in ways that enable them to also fulfil their fiduciary duties to their end investors,” the entrepreneur elaborated.
Dealing with cyber threats has been a major concern for crypto businesses which have suffered a number of hacking attacks resulting in the theft of funds. “Clients of custodians and exchanges want to reduce their risk profile and insurance is a good hedge against those risks,” commented Murray Wood, Asia head of financial specialties at global insurance broker Aon. He also noted that regulators are increasingly looking at insurance protection as a best practice.
The partnership between Onedegree and Hkbitex is not the first example of such cooperation. A few years ago, Gibraltar Blockchain Exchange obtained an insurance policy to cover its digital assets from Callaghan Insurance, and in 2019 crypto wallet service provider Bitgo secured a $100 million policy through Lloyd’s to cover crypto assets in its custody. In April this year, New York Digital Investment Group (NYDIG) unveiled a plan to create bitcoin-powered products and services for the global insurance industry.