Kingdom Trust is the first to receive a milestone digital currency policy from Lloyd’s of London. The insurance marketplace chose to quietly offer coverage to a crypto firm in the United States.
Kingdom Trust’s Cryptocurrency Policy
Lloyd’s of London has made its first moves to enter the cryptocurrency marketplace in the form of a new insurance policy. This step may be significant to both the crypto and insurance industries, but Lloyd’s chose to make the transition into the industry quite quietly.
The first recipient of this milestone policy is Kingdom Trust. This independent cryptocurrency custodian is based in Kentucky, United States, and was launched in 2010. It is regulated by the South Dakota Division of Banking. It is a custody service provider for more than 30 different assets. Among them include Bitcoin, Ethereum, Litecoin, Ripple, and others. It intends to boost those numbers in the future.
Lloyd’s of London Crypto Policy
The choice to sell the policy arrives on the heels of previous statements Lloyd’s has made on the subject of cryptocurrency insurance. Lloyd’s issued a bulletin in July 2018. The bulletin was sent to its syndicates and stated that “In view of their novel nature and the absence of clear regulatory frameworks and precedents for cryptocurrencies and other crypto assets, Lloyd’s considers that managing agents should proceed with a level of caution that recognizes the risks associated with this class of asset.”
In providing insurance for a cryptocurrency custodian, an insurance company, even one as large and established as the Lloyd’s of London marketplace, faces considerable challenges. Primary among those struggles is that the historical data is nearly non-existent. Insurers require this data to assess the risk involved in the coverage as well as in calculating fair premiums for the policyholder.
The Cryptocurrency Insurance Challenge
Cryptocurrencies are notorious for their wildly fluctuating prices. While many traders have used this movement for outstanding outcomes, it can take more than just savvy and strategy to benefit from this volatility.
Moreover, crypto has also racked up its share of controversy. Fraud has plagued the marketplace and thieves and scammers have enjoyed using crypto as their ransom currency of choice. This makes it difficult for insurance companies to be able to decide on the risks associated with selling coverage. Clearly, Lloyd’s feels it has managed to develop enough of a grasp on cryptocurrencies to legitimize them with its name and to cover those providing custody services.