Insurance Giant Aon Is Testing the Waters of DeFi

Insurance broker Aon is dipping a toe into decentralized finance (DeFi).

Announced Wednesday, the world's second-largest insurance intermediary has embarked on a pilot with Nayms, an insurtech platform that allows cryptocurrency holders to provide decentralized insurance cover against losses due to hacks or buggy software.

Also involved in the project are Relm Insurance, a Bermudian insurer that specializes in digital assets, and Teller Finance, an automated matchmaker between investors’ assets and crypto risk liabilities.

“The Nayms platform puts the tool of smart contracts in the hand of regulated underwriters (like Relm) and brokers (like Aon), to open up a new capital source when underwriting crypto risk,” Nayms CEO Dan Roberts said via email. “This could be in either crypto (ETH, BTC) or in fiat (via a stablecoin). Aon is assessing both options as part of longer-term programs.”

The firms did not elaborate on when the pilot might morph into something more like a live product.

Stepping back, the process of bringing together investors whose collateral will be used to insure specialized risks, is not so dissimilar to the way the Lloyd’s of London insurance market operates. Lloyd’s is backed by pools of underwriters, composed of both corporations and private individuals. (These private investors became known as “Lloyd’s names,” which “Nayms” is a play on.)

Decentralized insurance offerings already exist, as with DeFi insurance alternative Nexus Mutual, which created a community-owned asset pool allowing cover for certain crypto industry risks. Nexus recently began expanding its repertoire beyond decentralized exchange and finance.

Aon is familiar with the cryptocurrency space, most notably having worked with San Francisco-based exchange Coinbase. For the most part, the policies in which Aon and other brokers like Marsh are involved tend to insure crypto while at rest, held in cold storage and not connected to the internet.

“Aon is committed to embracing technology and is constantly developing its offering for our growing client base in the digital asset space,” Aon’s crypto specialist, Benjamin Peach, said in a statement. “By collaborating with Nayms and Relm to launch this pilot, we are taking the first step to creating a platform for digital asset companies to scale up their cover efficiently and cost effectively as the market continues to expand.”

Roberts of Nayms said the pilot is about creating more cover for the risks associated with DeFi platforms, but also the wider crypto space as well.  

“In contrast to other insurance protocols, Nayms is a general marketplace, in the sense that any type of insurance product can be placed,” said Roberts. “This allows us to enable a wide variety of cover that’s needed in digital assets and beyond, instead of, for example, covering smart-contract risk exclusively.”