The relationship between Lloyd’s of London and bitcoin storage service Elliptic Vault broke down just weeks after Elliptic’s launch in January, it has emerged.
Elliptic Vault was the first insured bitcoin storage service in the world and was widely hailed as a milestone for the industry.
The exact details of how the relationship between Lloyd’s and Elliptic broke down are unclear, with Elliptic COO Tom Robinson saying his impression was that Lloyd’s pulled out “due to the high level of publicity” around the deal.
In turn, a Lloyd’s spokesperson claimed Elliptic never actually finalised the deal with the insurer to begin with, telling CoinDesk: “Enquiries were made about a policy, but the policy was not taken out.”
When shown a copy of a certificate between Lloyd’s and Elliptic, the spokesperson attempted to retract their previous comments, instead issuing the statement:
“Elliptic are not insured by Lloyd’s. We will not comment on speculation from Elliptic regarding other matters.”
Elliptic has strongly rejected suggestions it was not fully insured, telling CoinDesk: “Elliptic has insurance in place and always has done since we first began offering the Elliptic Vault service.”
“We did have insurance from Lloyd’s, absolutely,” Robinson stressed.
A milestone for bitcoin businesses
Elliptic Vault’s launch in January 2014 was seen as a sign of maturity for bitcoin. The association with Lloyd’s of London gave the service credibility and coming soon after the widely-reported story of one bitcoiner losing millions in a discarded hard drive, it seemed to answer the question of whether bitcoin could be held securely.
Elliptic’s press release on 9th January proudly declared that Elliptic Vault had “insurance underwritten by Lloyd’s of London”. But by early February, the relationship was dead.
The Internet Archive shows that by 15th February references to Lloyd’s of London had been removed from Elliptic’s website.
Since then, Elliptic has made no announcement that its relationship with Lloyd’s had ended, or that by 3rd February it had engaged new insurers.
CBC Insurance, who brokered Elliptic’s new insurance coverage, confirmed the new arrangement. Elliptic COO Tom Robinson said there was no gap between the two coverages.
In blogposts on 13th March and 1st May, the company refers to its insurance offering, noting that it pays out in bitcoin as well as sterling, and boasting that Elliptic “uses a large, multinational insurance company with extremely strong financial backing and a diverse risk portfolio”, but neglecting to mention that the company was no longer linked with Lloyd’s.
Robinson said his company “made the switch clear to those enquiring about our insurance, including in media interviews”.
Underwriters and insurers
A key part of this story is the difference between an underwriter and an insurer. An underwriter determines the risks around insuring a company, for example, and could be said to be doing the ‘legwork’ on an insurance offering. That offering is then presented to an insurer, who actually takes on the risk and provides the insurance.
Insurance companies may do underwriting themselves, or they may hire underwriters operating within the Lloyd’s of London marketplace, for example.
The phrase “insured by Lloyd’s of London” is sometimes used as shorthand, but it’s not the most accurate way to describe deals done through the Lloyd’s of London marketplace.
The progression of bitcoin insurance
Since Elliptic Vault launched in January, other bitcoin companies have also insured customer deposits, notably Circle and Xapo. More recently, the Great American Insurance Group announced it would begin offering coverage for bitcoin.
Robinson says the problems Elliptic has faced were partly “a symptom of the young nature of the bitcoin ecosystem”.
“This is something that a lot of bitcoin businesses are experiencing, they launch bitcoin services in partnership with big brands and then those big brands have second thoughts when they receive a lot of publicity around it and then aren’t so keen.”
Robinson’s colleague, Elliptic CEO James Smith, said the company is “enjoying fast-growing interest from financial institutions and other businesses both in the US and Europe”.
“We are currently completing a funding round which will enable us to rapidly scale our team and customer base over the next couple of years, and look forward to helping many more companies engage with the digital currency ecosystem,” he added.
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