Evertas, the first digital asset insurer has Announced its acquisition of Bitsure, the first crypto mining insurance provider, as it looks to expand its coverage in multiple jurisdictions.
The firm that is among the few to work with Lloyd’s of London partnered with Bitsure last month to become its crypto mining underwriter, a deal it rendered at Arch Insurance International. lifting its coverage limits for mining operations to $200 million.
Previously, Bitsure offered a $5 million per location insurance policy with plans to cover more spheres of market operations.
The new deal has been hailed by observers for strengthening mining operations and other players, including exchanges, as companies navigate the troubled waters created by the collapse from FTX and the generally poor market forces that pushed miners into the woods.
As part of the deal, Thomas Shewchuck, Bitsure’s president and co-founder, would become Evertas’ head of underwriting in a bid to take advantage of Bitsure’s 6% mining coverage of the total Bitcoin network.
As a result of the nature of digital assets, providing the perfect insurance coverage is not an easy task and many believe that the absence of deep coverage has led to the collapse of companies along with limited growth, as most of the executives are left without the desired support.
Evertas CEO J. Gdanski pointed out the intricacies involved in securing crypto mining, though it may look simple on paper.
According to him, market forces, including the underlying asset mined, can significantly affect the value of rigs and in turn pose problems for insurance companies.
“Of all the crypto risks, this is probably the most familiar to the mainstream insurance market. Still, there is a lot of variability in the price of mining hardware because its replacement value is based on the value of the asset being mined. That presents unique and novel challenges, and that’s why it’s hard for other insurers to feel comfortable with it.”
Miners need insurance to survive the winter
In all fields, limited risk is essential for sustainable growth over time. The risks associated with digital assets require specialized insurance coverage, especially with the cost of high-powered mining equipment.
Shewchuck explained that equipment value, as well as profitability, is affected by mining difficulty and that more miners mean fewer rewards as they progress through the field.
Low income causes miners to abandon projects and sell at relatively low prices. This leaves both parties in a bad position because, on the part of the miners, they have lost the ability to continue their operations.
Insurers, for their part, are left in a precarious position because if the bigger players take over the mining rigs, there would be more teams in some places, opening up their risks even more.
On a more positive note, a perfect combination of miners and insurance companies could see miners survive bear markets without selling their Bitcoin reserves or going out of business.
