Over the last few years we have observed an increase in the number of crypto mining operations across Canada. This holds especially true in the central provinces which offer a comparative cost advantage from both a real estate and energy perspective. While it is great to see this sector thrive, we are also quick to note that many of these operations sit either uninsured or without adequate coverage. This is due to the current challenges and cost barriers that exist within the digital asset insurance marketplace.
In this article we will break down what is required in order to insure your crypto mining operation.
Crypto Mining Insurance Landscape
As it stands, there exists a general lack of interest on behalf of insurers to take on crypto related risks. This is often fueled by a lack of mining specific expertise, concerns around underlying market stability, general stigma and a risk aversion towards emergent industries.
Whether warranted or not, this has resulted in a very limited number of global insurers who are willing to offer coverage. In turn, insurance for crypto mining property is often far more expensive than that for comparable industries.
How do I insure my crypto operation?
The first step to insuring a crypto mining operation is to partner with an insurance brokerage who has demonstrated expertise and experience in the space. Given the fragmented nature of current market offerings, it is imperative that your broker can leverage their global market relationships to source adequate coverage at acceptable terms.
Once the interested parties have been identified, nearly all insurers will require information on the actual mining property, storage, building and particulars of one’s operations. Typically, this will include questions about:
Replacement Cost value of crypto mining assets
Storage type (open room vs. sea container)
Temperature maintenance (i.e. fan and immersion cooling, remote shut-offs, auto alerts)
Building details (age, construction type, condition, updates...etc.)
Theft protections (surveillance, on-site security, access controls, monitored alarms…etc.)
Fire protections (dry vs. wet suppression systems, monitored alarms…etc.)
Years in operations, loss history…etc.
How much does crypto mining insurance cost?
The above question is one we get often. The answer however is not as clear cut. The price of insuring crypto mining property is primarily dependent on two main factors. That is – the limit of insurance required and the characteristics of the property and operations (as listed above).
Given the limited number of insurance companies who compete in the space; annual property premiums are often much greater than those levied against comparable industries. This market reality reinforces the impetus in working with an experienced brokerage who can achieve the best terms possible.
What other insurance is available for crypto miners?
Most of the time we are approached to insure physical crypto mining property and related equipment. This would include items such as mining rigs, network cabling, cooling fans, sea containers and the actual buildings in which they are housed. Physical asset coverage is a key risk management strategy used to protect one's investment in the event of a loss.
Commercial General Liability
CGL or commercial general liability protects against the cost associated with instances of 3rd party property damage or bodily injury. It is not uncommon for landlords to require their crypto mining tenants to carry CGL as a condition of their lease agreement. Typically this is for a limit of $2M or $5M. For building owners, this is often included as standard in their commercial building package policy.
Crypto mining tenants may also see a requirement to carry TLL or tenant's legal liability. This is offered along side CGL and protects the tenant against any costs associated with damage to the leased unit.
Business Interruption & Slashing Fees
There are a few insurance products tailored to protect against the operational risks associated with crypto mining operations; including specialized business interruption and slashing fee coverage. In essence this would protect against the loss of business income in the event of certain shutdowns. Coverage is also available to protect against the loss of staked capital and any penalty mechanisms imposed due to downtime – such as a power outage.
Do you need crypto mining insurance?
The first step to insuring your crypto mining farm is to speak with an experienced insurance professional who can understand the unique aspects of your operation. If you would like more information about crypto insurance or any other related matters, our dedicated risk management team would be pleased to assist.