UPDATE (28th August 15:00 BST): CoinDesk has reached out to Coinbase for clarification on whether the company’s policy excludes bitcoin held in cold storage (offline wallets).
Coinbase has revealed that its users’ online wallets are being insured through top broker Aon.
The news came in a surprise blog post in which the company announced it has been insured against the theft or loss of bitcoin since November 2013, stressing that its users are not being charged for the cover.
The wallet and merchant services provider said it teamed up with Aon, one of the world’s largest insurance brokers, to further protect its users’ bitcoin funds.
Aon uses underwriters with high credit ratings, Coinbase explained, such as an Standard & Poor’s rating of ‘A+’ or AM Best rating of ‘A XV’ or higher.
Protected against theft and hacking
The company said its policy provides sufficient insurance to cover the company’s average online holdings at any time and protects against a variety of potential causes of loss:
“Coinbase is insured against theft and hacking in an amount that exceeds the average value of bitcoin we hold in online storage at any given time. The insurance covers losses due to breaches in physical or cyber security, accidental loss, and employee theft.”
There is one significant caveat, however:
“It doesn’t cover bitcoin lost or stolen as a result of an individual user’s negligence to maintain secure control over their login credentials.”
The policy comes with industry standard policy exclusions that apply to most policies around the world. Additional details are available on the Coinbase FAQ page.
Coinbase vs the competition
Coinbase went on to warn against claims made by some other companies in the bitcoin industry.
The company pointed out that some bitcoin wallets claim to be fully insured, but in reality are not working with accredited carriers or are self-insuring. Others claim to be fully insured currently, but only because they hold very few bitcoins which can be covered by a small policy. Once the operator grows, the cover would not be adequate, Coinbase said.
Although blog post did not specifically name the bitcoin companies in question, there are relatively few operators offering insured bitcoin services.
Elliptic Vault launched in January, with insurance underwritten by Lloyd’s of London. However, the company’s deal with Lloyd’s broke down and it was forced to look for a new insurance company shortly after it launched. It has since made a deal through broker CBC Insurance.
Xapo is another bitcoin company claiming to have insurance cover, stating that all bitcoins in its vaults are covered. However, the company is insured by Bermuda-based Meridian Global Insurance Limited, which is wholly owned by Xapo.
CoinDesk took a closer look at the issue of insurance in a recent feature which examined why insurance companies are reluctant to cover bitcoin operators.