Evertas, the first digital asset insurance company has announced its acquisition of Bitsure, the first crypto mining insurance provider as it looks to expand its coverage in multiple jurisdictions.
The firm which ranks among the few to work with the Lloyd’s of London partnered with Bitsure last month to become its crypto mining underwriter, a deal that yielded in Arch Insurance International raising its coverage limits for mining operations to $200 million.
Previously, Bitsure offered an insurance policy of $5 million per location with plans to cover more spheres of market operations.
The new deal has been hailed by observers to give strength to mining operations and other players including exchanges as firms navigate the turbulent waters created by the collapse of FTX and generally poor market forces which pushed miners to the woods.
As part of the agreement, Thomas Shewchuck the President and co-founder of Bitsure would become the head of underwriting at Evertas in a bid to leverage on Bitsure’s 6% mining cover of the total Bitcoin network.
As a result of the nature of digital assets, providing the perfect insurance cover is not an easy task and many believe that the absence of deep coverage has led to the collapse of firms coupled with limited growth as most executives are left without the desired support.
Evertas Chief Executive J. Gdanski noted the complexities involved in crypto mining insurance although it may seem straightforward on paper.
According to him, market forces, including the underlying asset mined can significantly affect the value of the rigs and in turn, pose problems for insurance companies.
“Of all the crypto risks this is probably the most familiar to the conventional insurance market. Still, there’s so much variability in the pricing of mining hardware because its replacement value is based on the value of the asset that’s being mined. That does present unique and novel challenges, and that’s why it’s hard for other insurers to get comfortable with it.”
Miners need insurers to survive the winter
In every field, limited risk is critical for sustainable growth over time. The risks associated with digital assets require specialized insurance covers especially with the cost of high-powered mining equipment.
Shewchuck explained that the value of the equipment as well as profitability is affected by the mining difficulty and more miners mean fewer rewards as they scramble in the field.
Low income leads to miners abandoning projects and selling at relatively low prices. This leaves both parties in a bad position because, on the part of the miners, they have lost their ability to continue their operations.
The insurers on their end are left in a precarious position because if bigger players take over mining rigs, there would be more equipment in a few locations further opening up their risks.
On a more positive note, a perfect blend of miners and insurance firms could see miners survive bearish markets without selling their Bitcoin reserves or shutting down their operations.
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