The cryptocurrency mining equipment will not be insured as announce by Old Mutual, a legacy, pan-African insurance company, according to a statement released on June 10. The company explained the risk, expense, and speculative nature of the industry.
According to Bitcoin Magazine, Africa contributes less than 10 percent of the total bitcoin hash rate. Strict regulations, costly electricity prices, and mining rig price tags are preventing it from developing as cited by many advocates for the growing industry. I think there could be problems which could get worst if miners cannot take out protection on their equipment.
There have been ban on insuring mining previously and ‘Old Mutual’ is not the first to ban coverage for mining equipment or price premiums outside the reach of many users. Cryptocurrencies often considered as an asset structure with a different risk profile than other forms of capital, may carry premiums that reflect that risk.
Following extensive research, as well as an in-depth review of claims from clients that have incurred losses to equipment used for cryptocurrency mining, Old Mutual said it had already started advising its branches against any move to insure any businesses involved with the industry. This is as a result of the depth research including in-depth reviews involving claims of incurred loses to equipment used for cryptocurrency from clients.
Christelle Colman, an Old Mutual insurance expert stated that “It is really tricky to conduct a proper risk analysis of a fledgling industry, unregulated, that is already on the radar of financial authorities as a result of the unfortunate association with money laundering and cyber crime, there fore , we have decided not to provide cover for such type of risk.”
The insurance company noted that crypto mining operations typically utilize high-cost computers, servers and other equipment modified to run heavier application with specific integrated circuit devices capable of overloading the computer’s central processing units or graphic processing units. Adding that, running a system continually, which is the industry practice as confirmed by the company ,introduces risks of overheating, and other malfunctions which exposes it to more risks all the time.
A crypto mining equipment.
“ Now even if we consider doing a comprehensive inventory of the insured equipment, it’s still difficult because the value of the highly modified computer equipment is typically inflated as it’s almost impossible to verify or ascertain its real price as it is usually imported from obscure suppliers in the Far East,” Colman stated.
Old Mutual is also concerned about other flaws such as the volatile, unregulated nature of the industry, which is often associated with companies with speculative trading which are prone to cyber crime or going bust.
Though insurers have come down on protecting mining equipment, CoinBase has taken out $255 million for coins held in hot wallets on behalf of their customers , indicating insurance companies interest to enter other crypto sectors.
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