Everyone seems excited about crypto / web3 insurance just as everyone is excited about any area that has white space. Thoughts and thesis below.
spectrum of insurance - from Defi on the left to centralized on the right
example companies: Nexus Mutual, Unflashed, Nayms
Usually protocol level work, insurance by collective investment
often seen via smart contracts
Pros: good at getting to high limits quickly and at a good price, easier to underwrite, often instant payouts
Cons: very niche, hard to do D&O, cyber, etc.
example companies: Realm, Sompo, Superscript, Axis, Relm, Coincover
bigger ones will write crypto insurance risk in a more traditional way
Pros: More extensive diligence and process, increasing internal buy-in and interest
Cons: hard to get to high limits due to diligence and data requirements
usually doesn't provide cover
more for getting insurance industry comfortable
May have heard of Breach - more in the middle as they insure crypto on exchanges
biggest obstacles for crypto insurance / is there appetite?
need internal buy-in --> increasing but not there yet
huge education aspect in the space
ESG fanatics who think bitcoin is ruining our planet
bitcoin is a ponzi scheme
very little loss history --> hard to underwrite
those likely to purchase crypto insurance (businesses) are later stage e.g. chainalysis
years ago, crypto insurance was very expensive and less understood
what to keep in mind when investing in this space
few competitive advantages - very few players in general
any capacity provider will probably stand out because they're willing to take on crypto risk and figure it out
little innovation thus far. market is still small.
seeing more insurance people move into the space versus tech-first
need API integration / technological user friendly
longer term view of where the space is going
consolidation with other insurtechs and insurance companies like cyber
consolidation with other tech companies in blockchain analytics, KYC, AML, etc (chainalysis, Merkle, elliptic)
likely there will be price war and margin compression as more enter the space and undercut each other