According to some rumours, Coinbase is considering creating its own insurance company.
In fact, at the beginning of 2019, the insurance broker Aon started to set up captive companies in the Cayman Islands involving some crypto companies. The aim would be to help these companies to have access to additional insurance cover at more reasonable prices.
Today it is very difficult for crypto companies to obtain sufficient insurance coverage, to the point that, for example, many exchanges self-insure themselves simply by setting aside funds to cover any losses from theft or hacking.
Coinbase would be negotiating to set up its own regulated insurance company in collaboration with Aon.
The rumours suggest that Coinbase and Aon’s objective is to address the lack of insurance coverage available to crypto companies, but using a formal structure that would prevent access to funds for other purposes and avoid ambiguity about what the actual insurance coverage of the company is.
In this way, the funds for insurance coverage would be segregated and held by a supervised and regulated entity, which could help the company also obtain coverage from the reinsurance market.
Creating captive insurance subsidiaries, wholly owned by the insured company, has become commonplace for many companies as a way to reduce costs and improve access to risk-reducing reinsurance markets. So it’s no wonder that Aon is working in this direction on behalf of various crypto companies, nor that Coinbase might be involved in the project with Aon.
There is no concrete evidence or confirmation of this Coinbase project, however, Aon has admitted to having created the first captive subsidiary for the crypto sector at the beginning of the year.
In addition, the two companies have already worked together in the past, when in April Aon helped organise the $255 million insurance coverage for the Coinbase hot wallets.
Aon’s CEO, Jacqueline Quintal, said:
“There is a lack of capacity and some are uncomfortable with what is available in the marketplace and are looking to alternative solutions. I think the path for most will be to buy some amount of traditional insurance first and then to explore alternative structures, potentially including a captive — and we are having more and more of these conversations”.