As claimed by Business Korea, cryptocurrency exchanges are now in negotiations with insurance firms. The Korean Blockchain Association is having a conversation with Hyundai Marine & Fire Insurance Co. and Hanwha General Insurance Co. in order to understand how crypto exchanges can take out an insurance policy. The Korean Blockchain Association has been conducting the negotiations on behalf of their member cryptocurrency exchanges since April 2018. The Association aimed to choose a definite insurer that its members can acquire insurance from. Insurance firms have been extremely reluctant and hesitant to insure cryptocurrency exchanges because of security issues and insufficient credibility.
Firstly, the association considered it an excellent possibility for both parties if one insurer could secure many cryptocurrency exchanges in one go. They initially hosted an event to brief insurance firms and let the members to select their preferred insurer. After the Bithumb hack happened recently, insurance companies have become more unwilling and uncooperative, especially since the damages were worth approximately $31.46 million.
The Korea Blockchain Association emphasized a stronger internal control system and security at the earlier sessions. But we cannot trust it as even the largest cryptocurrency exchange in South Korea was exposed to cyber attacks. There are no statistics related to the risks of virtual currencies both at home and abroad and it is still not sure whether an insurer can accept exchanges as its policyholders as a group, which are smaller and riskier than Bithumb.
The Korean Blockchain Association
Business Korea proposed that insurance organizations could compensate their risk by working with reinsurance companies, the structures that provide insurance for insurers, when the insurance companies decide choose not to work with crypto exchanges. The problem is reinsurance companies might not decide to insure the insurance firm if they cannot trust the level of security from cryptocurrency exchanges.
When insurance companies can increase premiums for cryptocurrency exchanges and enforce greater security measures, the question is, how efficient are the insurances? The present limit of liabilities when it comes to insurance for crypto exchanges is approximately $2.7 million to $4.49 million. Reuters informed in February 2018 that many insurers were not yet convinced the cryptocurrency industry would be large enough for premiums to cover potential losses. According to CoinMarketCap, the cryptocurrency industry’s total market capitalization was approximately $500 billion.