There are four types of crypto insurance policies primarily used to mitigate the risks confronting custodians.
The kind of coverage typically applied to high-value, physical items, such as artwork, cash, gold, precious gems, and even valuable documents — while these items are in transit, in storage or on display. Anything that might be the goal of an Ocean’s 11-type heist is going to be covered by a specie policy.
Most recently, specie insurance has been used to cover digital assets.
Fidelity and Crime
Protection against loss due to employees engaging in fraudulent behavior.
Technology Errors and Omissions (Tech E&O)
Also called slashing insurance, this coverage offers protection when a failure of technology results in a loss of access to digital assets. This can be software failure, such as a flawed smart contract erroneously causing a loss of assets; or hardware failure, such as storage corruption causing a loss of access to private keys.
You may have heard standard errors and omissions (E&O) also called professional liability insurance. These policies protect companies, their employees, and other affiliated individuals against claims of deficient work or negligent actions taken in the rendering — or failure to render — professional services to others. E&O could potentially apply to crypto custodians, though it’s much more likely they would require Tech E&O as described above.
Directors and Officers (D&O)
This is coverage for legal fees, settlements and judgments of covered claims that might result from wrongful acts committed by directors and officers while doing their jobs.
In emerging industries, such as Web3, D&O is often required, given the inherently risky nature of the business.
Crypto-Specific D&O: We also call this Skinny D&O because it lacks policy features less likely to be required by a Web3 firm. For example, standard D&O offers public companies protection against shareholder lawsuits. Because most crypto companies have as their investors private equity or venture capital firms, and because private investors are very unlikely to sue their portfolio companies, that risk is omitted from our crypto-specific D&O, and premiums are lowered as a result.
This is a good example of how our crypto insurance specialization gives us the insight and flexibility needed to adapt policy types to the unique needs and circumstances of the Web3 space.