Virtual Asset Insurance Launched One After Another... Mixed Expectations and Concerns [1mm Financial Talk]

Coin Market Exchange 'Viblock' First to Join Samsung Fire & Marine Insurance Product
Virtual Asset Industry Weighs Between Insurance Enrollment and Reserve Accumulation
"Likely to Join Mainly Small and Medium Companies... Concerns Over Risks"

[Image source=Yonhap News]

Samsung Fire & Marine Insurance has launched the first 'Virtual Asset Business Liability Insurance (Virtual Asset Insurance)' that compensates for accidents such as hacking in virtual asset transactions, and 10 other non-life insurance companies including KB Insurance and Heungkuk Fire & Marine Insurance are preparing to release products one after another ahead of the enforcement of the Virtual Asset User Protection Act this week.

According to the insurance industry on the 16th, KB Insurance launched the second virtual asset insurance product in the non-life insurance industry on the same day. Samsung Fire & Marine Insurance, which released the industry's first product on the 12th, accepted 'Viblock,' a coin market exchange, as the first subscriber. The insurance period is one year and is renewed annually. According to the Virtual Asset User Protection Act, virtual asset insurance is insurance that virtual asset businesses must subscribe to in order to protect investors' assets. Businesses such as virtual asset exchanges must subscribe to insurance or accumulate reserves of a certain scale to prepare for emergencies such as hacking or system failures.

According to the enforcement decree, Korean won market exchanges must subscribe to insurance or mutual aid or accumulate reserves with a compensation limit of at least 3 billion KRW, and coin market exchanges and wallets must take measures such as subscribing to insurance or mutual aid or accumulating reserves with a compensation limit of at least 500 million KRW. There were no virtual asset-related insurance products in the domestic insurance market until now. Due to the lack of statistical data such as the probability of virtual asset accidents necessary for product development, Korean Re, the only domestic reinsurer, has undertaken the task of product development and rate calculation for premium determination.

The Financial Supervisory Service reviewed and approved the common terms and conditions of virtual asset insurance products reported by 11 major non-life insurers twice on the 10th and 12th. As soon as they receive the approval letter, they can launch the product, which is why Samsung Fire & Marine Insurance was the first to release the product. Since it is a mandatory insurance under the Virtual Asset User Protection Act effective from the 19th, the terms and conditions of the insurance companies are identical. Heungkuk Fire & Marine Insurance will release the product on the 17th, and other non-life insurers such as Hyundai Marine & Fire Insurance and NH Nonghyup Property & Casualty Insurance also plan to launch products in line with the enforcement date of the law on the 19th.

However, since it is the first insurance of its kind, non-life insurers are more worried because the risks are uncertain. A representative from a non-life insurer explained, "Originally, insurance companies did not voluntarily devise this through market research, but had no choice but to release the product due to the enforcement of the law, so the atmosphere is not positive." Another representative expressed concern, saying, "Small businesses, rather than large businesses with sufficient reserves, will have no choice but to subscribe to insurance. Security and system-related issues will certainly be weaker in small companies' technology, which could increase the risk for insurers in terms of loss ratio."

From the business operators' perspective, there is an option to accumulate reserves besides subscribing to insurance, so it remains to be seen how much demand there will be for the insurance product itself. Insurance premiums are determined through negotiations between insurers and business operators. A representative from Dunamu, which operates the virtual asset exchange Upbit, said, "We need to internally determine which is more advantageous between paying insurance premiums and accumulating reserves," adding, "Since the conclusion must be reached by the enforcement date of the law on the 19th, I understand that the departments in charge of the business operators are busy."