Bitsure, a specialized insurer of Bitcoin mining operations, has been bought by Evertas, one of the few cryptocurrency insurance providers to deal with the Lloyd’s of London market, for an unknown sum.Thomas Shewchuck, co-founder and president of Bitsure, joins Evertas as head of underwriting as a result of the agreement.Due to underwriters and issuers’ difficulties in comprehending the distinctive characteristics of digital assets, crypto firms have found it difficult to find insurance products in recent years.
By contrast, Bermuda-based Arch Insurance has given Evertas permission to provide mining insurance of up to $200 million per location after Bitsure was requested to be its specialized mining policy underwriter early this year. Bitsure had the ability to construct policies for only $5 million per site earlier. Compass Mining, a bitcoin hosting and mining company, announced in December that it has created a $75 million insurance coverage for mining equipment.
According to Evertas CEO J. Gdanski, offering insurance for the specialized machinery used to mine bitcoin can seem similar to offering data centers and similar facilities the same basic property-risk protection.However, a persistent aversion to cryptocurrencies in general, along with a number of factors that influence the price of mining rigs, make it a poorly understood risk, according to Gdanski.
“Of all the crypto risks this is probably the most familiar to the conventional insurance market,” Gdanski said. “Still, there’s so much variability in the pricing of mining hardware due to the fact that 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.”
Mining difficulty has an impact on equipment value for cryptocurrencies depending on projected cash flow over the next few years: Since it’s a zero-sum game, more miners on the network will result in fewer bitcoin payouts, according to Shewchuck, the new head of underwriting at Evertas.
“As the bear market continues and we go into the halving, margins continue to get crushed for miners,” he said in an interview. “When it’s not possible to mine profitably, people turn their rigs off and often just sell them at a discount to larger players. This means more equipment in fewer locations, which increases the risk.”