New York startup Assurely announced a new insurance product offering, CrowdProtector, to cover Security Token Offerings (STO) and other types of crowdfunding. For issuers, the product provides cover for investor complaints and lawsuits. For investors, they can potentially get their original investment returned where there is bad behavior by the issuer. That includes misrepresentation and misuse or theft of funds.
“This solution demonstrates the value of insurance in helping opportunities move forward. New crowdfunding practices are proliferating today” said Dan Kumpf, Chief Underwriting Officer, Global Professional Lines, at AXA XL. “Without proper coverage, millions are at risk. Our work with Assurely is a great example of innovation in the industry. Collaboration between incumbents and innovative InsurTech startups such as Assurely, will yield a positive result for the industry and advance it as a whole.”
The cover is only offered in the event of a successful funding, but investors don’t need to apply. And for the issuer, they only pay after the fundraising and the premium is dependent on the amount raised.
So far Assurely has signed up six funding portals, five of which are more conventional crowdfunding, and one is for security token offerings.
Assurely portrays the policy as an enhanced traditional Director & Officer-like insurance program. The startup hopes that the CrowdProtector brand will become a “symbol of validation and trust.” Because presumably a certain amount of due diligence is done before providing the insurance. The question is who carries out the vetting? We’re awaiting a response from Assurely.
The insurance startup also provides cover for cryptocurrency cold storage theft, cyber insurance and directors and officers insurance.
It is notoriously difficult to get insurance cover in the cryptocurrency sector because there have been so many large thefts at cryptocurrency exchanges. BitGo recently managed to provide some protection for offline key storage.
Plus there’s been a significant amount of bad behavior with ICOs. At the same time, insurance companies have to go up a learning curve. For those insurers that envision a growing market, getting in early is an opportunity, so long as they can manage their risk.
On June 18-19 2019 Hanson wade is running the Blockchain for Insurance conference in London. Ledger Insights is a media partner.