Insurance companies look to cash in on crypto-kidnapping fears

NBC News

2 days ago

A recent string of horrific assaults and kidnappings targeting people rich in cryptocurrency is heightening fears among investors about their physical safety — and insurance companies are hoping to cash in.
At least three companies that provide insurance and security services specifically tailored for cryptocurrency holders and companies are working to come up with insurance policies for those who fear physical violence and kidnapping, called kidnap and ransom (K&R) policies, they told NBC News.
Rebecca Rubenfeld, the chief operating officer of AnchorWatch, a crypto insurance firm that's working to begin offering kidnapping and ransom protection by this fall, said that fear of violence was a major topic at this week's annual Bitcoin Conference in Las Vegas.
'They're tense,' Rubenfeld told NBC News. 'I'm not saying that because I'm trying to sell insurance, but overall, the mood is a very good environment for me.'
The earliest reports of physical attacks on Bitcoin holders date back more than a decade, with dozens reported in the news media. But recent brutal attacks — of an Italian tourist tortured for weeks in Manhattan for access to his bitcoin, and a string of crypto executives and their family members kidnapped in France — have left many crypto holders particularly rattled.
Bitcoin and other cryptocurrencies' accounts are easily managed by a single person, outside of traditional banking institutions, and transactions are usually irreversible. That appealed to a certain class of libertarian nerds who acquired significant amounts of Bitcoin years ago. Many have become extremely wealthy as Bitcoin's price continues to reach new highs.
But as Bitcoin's value has risen, so too has its appeal to criminals, many of whom realize that the technology's ability to skirt traditional law enforcement also means it's much easier to launder if they can force a victim to give up their account.
Ryan Lackey, the chief security officer at Evertas Insurance, a company that sells insurance for digital assets, said the best protection for a publicly wealthy bitcoin holder is to both have physical security and to make it public that they can only access a certain portion of funds. Most of their crypto wealth should be protected with passwords stored in difficult-to-access locations, like banks or safety deposit boxes.
'The ideal product in the space is actually something where you can probably not get access to funds beyond a certain amount, and then you can pay them a small amount. This has to be something that's widely adopted, that's known by the dumbest possible kidnappers in the world, because they'd otherwise have no reason to believe it,' he said.
'You'd actually want to be known as a person who holds it, because it shows that you don't have access to it. It's just like the signs at 7-Eleven that say 'cashier does not have access to the safe,'' he said.
Lackey said Evertas encourages customers to get kidnapping and ransom insurance and is considering how to offer it directly.
Kidnapping and ransom insurance is common for corporate executives, and several traditional insurers that offer it sell custom policies for people who are rich from cryptocurrency. Traditionally, kidnapping and ransom insurance is often marketed for companies to take policies out for key employees.
Andrew Kurt, the vice president of executive risk at the insurance firm Hylant Capital, said he was not surprised to see more crypto companies offering K&R insurance because it is particularly lucrative, given how relatively few people actually get kidnapped.
'Historically, K&R has been a wildly profitable line of business for insurance companies, even though the premiums are very, very small,' Kurt told NBC News. 'The losses are few and far between.'
'I think what has occurred is probably not going to be a large frequency issue, but more of a severity issue here and there,' he said.
Joseph Ziolkowski, the CEO of cryptocurrency insurance company Relm, said that his company has been working out details to start offering kidnapping and ransom insurance, but that the process is complicated by a need to thoroughly evaluate a customer's cyber and physical security.
'The way coverage is priced is, there's effectively a base rate, and that base rate gets debited and credited based on favorable or unfavorable circumstances related to a particular risk. If someone has 24/7 personal security detail traveling with them at all times, that obviously would be a credit and would affect premium,' he said.
Some wealthy crypto holders have opted to try to largely disappear from public view. But for many, that's not an option. Some are visible because they work in the crypto industry or speak at conferences.
In other cases, bitcoin holders' identities are exposed to criminals without their consent. Earlier this month, Coinbase, the largest American cryptocurrency exchange, said that cybercriminals had stolen the personal information, including names and addresses, of some of its customers, and that some had been successfully tricked out of their holdings. According to state data breach filings, nearly 70,000 customers have been exposed.