UAE Companies Introduce Insurance for Crypto Firms, Citing Lessons from Bybit's $1.5 Billion Hack

Bridging the Insurance Gap for New-Age Companies

Speaking at a media roundtable, Joseph Ziolkowski, CEO and Founder of Relm Insurance, emphasized the necessity of such offerings for businesses in rapidly evolving sectors.

“We are focusing on providing access to insurance products that these companies need to grow their business and stay protected,” Ziolkowski said. “Products such as directors' and officers' liability insurance, professional liability insurance, and cybercrime insurance are some of the foundational coverages that any company in these emerging industries will require.”

Bybit Hack: A Learning Experience for the Insurance Sector

Ziolkowski pointed to the recent cyberattack on Dubai-based cryptocurrency exchange Bybit, which resulted in a loss of approximately Dh5.51 billion ($1.5 billion), as a pivotal moment for the insurance industry.

“There will be extensive discussions about the cause of the loss, whether insurance coverage was in place, and whether insurance policies will respond to this incident,” he explained. “These high-profile events provide crucial insights into the vulnerabilities within the digital asset sector and the effectiveness of available insurance coverage. Moving forward, we will continue refining our approach to risk management based on lessons learned from such incidents.”

Among the most sought-after policies, according to Ziolkowski, is directors' and officers' liability insurance, which protects executives and board members from personal liability in their decision-making roles within these high-risk industries.

Challenges in Insuring Emerging Sectors

The transition into providing insurance for digital assets and other novel industries is not without challenges. Martin Ruegg, Group CEO at Liva Group, highlighted the inherent difficulties in developing suitable insurance policies for these rapidly evolving sectors.

“The insurance industry typically relies on hundreds of years of historical data to assess risks and set pricing,” Ruegg explained. “In the case of digital assets and blockchain-based businesses, we simply do not have that kind of data, making it difficult for traditional insurance providers to adapt quickly.”

Many companies operating in these new sectors struggle to obtain adequate insurance policies due to the lack of precedent.

“If you approach any conventional insurer today, 80% would likely refuse to issue a policy for businesses in these sectors,” Ruegg added. “Without insurance, these companies cannot operate effectively, as coverage is often a regulatory requirement.”

Filling the Gap in the UAE Market

Ziolkowski noted that upon entering the UAE market, he identified a significant gap in available insurance products for digital asset companies.

“While there is substantial insurance and reinsurance capacity in the UAE, most of it is directed toward traditional industries,” he said. “However, the companies seeking licensure through the Virtual Assets Regulatory Authority (VARA) are engaged in highly innovative activities such as cryptocurrency exchanges, payment and remittance platforms, custodial services, software development, and hedge funds. Our goal is to bridge this gap and provide the insurance solutions they need.”

As the UAE continues to establish itself as a global hub for digital assets and financial technology, initiatives like the Liva Group and Relm Insurance partnership are expected to play a vital role in supporting the sector's long-term sustainability and growth.