Category: Blockchain insurance · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-10
Crypto asset insurance is conventional insurance issued by authorised carriers — predominantly Lloyd’s of London syndicates and Bermuda-domiciled reinsurers — covering the loss, theft and operational risks of digital assets held by institutional custodians and exchanges.
Crypto asset insurance is distinct from DeFi insurance and decentralised insurance. It is policy-form, indemnity-based cover written by FSMA-authorised insurers (or Lloyd’s syndicates) for institutional clients, typically with high deductibles, sub-limits and exclusions.
Definition
Crypto asset insurance products typically cover:
Cold storage loss — physical loss of private key material, hardware security modules (HSMs) and signing equipment;
Hot wallet loss — theft of cryptoassets from internet-connected wallets, subject to sub-limits;
Insider fraud — losses caused by collusion or theft by employees;
Specie cover — bailee liability for custodians holding assets on behalf of clients;
Crime cover — including computer crime, funds transfer fraud and social engineering; and
Errors and omissions / professional liability — for custodians and exchanges.
Lloyd’s of London is the principal market, with syndicates including Atrium (managed by Stirling), Arch (Lloyd’s syndicate 2012), Markel, Hiscox and others writing the class through coverholders and direct underwriting.
Legal / Regulatory basis
The applicable UK regulatory framework comprises:
Financial Services and Markets Act 2000 and SI 2001/544 — defining the regulated activity of effecting and carrying out contracts of insurance.
Financial Services and Markets Act 2023 — sections 21 to 23 of which extend the FCA perimeter to qualifying cryptoassets and create the legislative architecture for the new cryptoassets regime.
HM Treasury, Future Financial Services Regulatory Regime for Cryptoassets — Consultation Response (October 2023), which confirmed:
Phase 1: Fiat-backed stablecoin issuance and custody to be regulated under FSMA;
Phase 2: Broader cryptoasset activities including trading, custody, lending and intermediation to be brought into the perimeter.
FCA Policy Statement PS19/22, Guidance on Cryptoassets (July 2019) — taxonomy of exchange tokens, security tokens and utility tokens.
FCA Money Laundering Regulations registration regime for cryptoasset firms under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended.
PRA Rulebook — for prudential treatment of insurers writing the class, including the Solvency II Standard Formula treatment of underwriting risk and the use of Internal Models.
IAIS Application Paper on Cyber Risk Underwriting (2020) — relevant to the cyber-component of cold storage cover.
EIOPA Discussion Paper on Blockchain and Smart Contracts in Insurance (2021; 2023).
The Lloyd’s Catastrophe Modelling Standards (LCM 1.0+, refreshed periodically) inform PML estimation for crypto asset insurance writers.
How it works in practice
A typical institutional cold-storage policy includes:
Risk survey — physical inspection of the custodian’s vaults, HSMs, key management procedures and disaster recovery plans.
Sub-limits — separate limits for cold storage (often US$100m–US$500m per insured), hot wallet (typically a small fraction), crime and E&O.
High retentions — typically US$5m–US$25m per occurrence, reflecting the catastrophic nature of the exposure.
Specific exclusions — protocol-level failure of the underlying blockchain, war and cyber war (see LMA cyber war exclusions), and certain “rug-pull” or insider events.
Reinsurance structure — typically a quota share to Bermuda reinsurers and a panel of Lloyd’s syndicates, often with industry loss warranty (ILW) reinsurance.
Premiums for institutional custodians have ranged historically from 1% to 2.5% of insured limit, depending on the custodian’s controls and the specific market cycle.
Common variations / Subsequent developments
Coinbase, BitGo and Anchorage custody policies — placed via Lloyd’s brokers; periodic disclosures of programme size are made in regulatory filings.
Lloyd’s syndicate 1796 (Coincover) — first dedicated cryptoasset policy backed by Lloyd’s, launched 2020.
DeFi protocol cover for institutions — placed through specialist brokers for treasury managers and DeFi protocols.
Stablecoin issuer cover — overlap with stablecoin custody insurance and a growing segment following the BoE/FCA November 2023 paper on systemic stablecoins.
Capacity constraints — episodic, particularly following high-profile losses such as FTX (November 2022) and the Ronin Bridge exploit (March 2022).
The FCA’s Phase 1 regulation of fiat-backed stablecoin issuance and custody (expected to take effect under secondary legislation following the 2023 consultation response) materially affects underwriting of issuer-reserve risks.
Example
A UK-incorporated institutional digital asset custodian holds £600 million of bitcoin and ether on behalf of pension funds and family offices. It places a £150 million primary cold-storage policy through a Lloyd’s broker, with a £15 million retention and excess layers placed with two Bermuda reinsurers. The policy excludes protocol-level failure and applies LMA cyber war exclusions. When a vault inspection reveals a control deficiency in HSM key ceremonies, the custodian remediates within 30 days as a condition of renewal. Premium for the year is approximately £2.4 million.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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