In a surprise post on Coinbase’s blog today, Coinbase revealed that they have “been insured for almost a year.” Coinbase insurance was secured through worldwide insurance broker, Aon. Aon has over 60,000 colleagues worldwide and provides services for clients in over 120 countries. That Coinbase is securing insurance from a potentially worldwide network of underwriters is no small fact to look over. Coinbase’s insurance policy “covers losses due to breaches in physical or cyber security and employee theft.” Pointedly, Coinbase insurance does not help any individuals that lose their bitcoins through “user negligence” in the maintenance of secure control over login credentials. Though Coinbase revealed their broker partner in their established insurance relationship, the specific underwriters have not been identified.
The specifics of Coinbase’s insurance are held in Coinbase’s FAQ:
Coinbase is insured against employee theft and hacking in an amount that exceeds the average value of online bitcoin it holds at any given time. Specifically, Coinbase’s insurance policy would respond in the event that bitcoin stored in Coinbase was lost or stolen as a result of a breach of our physical security, cyber security, or as a result of employee theft.
Coinbase has held this insurance since November 2013 with highly rated carriers (S&P rating of A+ or A.M. Best Rating of A XV or higher).
This insurance policy does not cover damages resulting from a specific user’s loss, such as the losses resulting from a compromise of the user’s login credentials. Coinbase’s insurance also contains standard policy exclusions (e.x. force majeure). Should information regarding this coverage materially change, we’ll update this and other relevant pages in a timely manner.
Not Like The Others
In their blogpost, Coinbase subtly jabbed at other big names in the Bitcoin industry:
Some bitcoin wallets may claim to be “fully insured” while not working with accredited carriers or outright self-insuring. Others may be able to claim “fully insured” at the moment because their number of bitcoin stored are so low that a small insurance policy happens to cover everything until they grow.
Other Bitcoin services that have claimed to have varying degrees of insurance include Circle, Xapo, BTC Delta, and more. None of these companies, Coinbase included, have made untrue claims about their insurance: They have merely let enthusiastic members of the community with elementary understanding of insurance policies voice their hopes and dreams. Users can rest assured that Coinbase’s “online storage” will be covered in case of a heist similar to the social engineering Bitcoin hack perpetrated on Canadian Bitcoins.
Another thing to note from Coinbase’s blog is the fact that only the bitcoins held “in online storage at any given time” are covered by the insurance policy. While it is not unheard of for insurance policies to cover hundreds of millions of dollars worth of assets, it is likely that Coinbase has only insured their hot wallet, for lack of a better analogy. Coinbase doesn’t need to insure bitcoins entrusted to them which are currently in cold storage because the Bitcoin protocol allows for extreme levels of security that can and have been achieved on the side of the end user.