Lockton looks to educate insurers about blockchain technology

When I first started, being a lawyer by background, having always worked with more traditional companies, and then being at an insurance broker that always worked with traditional companies, it became apparent really quickly, that with any new technology and any new asset class, there was a huge learning curve. It was very clear from the beginning that we were going to have to focus on educating the insurance markets about the space. We knew we would have clients who needed the insurance. Education has always been a big challenge. Or the lack of education has always been a big challenge.

We spent a lot of time with lawyers and clients in the space, educating the insurance markets about the space so they're more comfortable providing the coverage to our clients. When we first started, the real focus was on insuring against the loss of assets. Not that the clients or the companies felt that there was a high risk for theft. But it was a great way to market themselves to say that they had insurance in place, in the off chance their security protocols failed and their assets were stolen from their platform. As these companies started to bring in more experienced business people to help run them, directors and officers liability insurance became a huge priority too, because it was experienced board members who came on or officers who came in required D&O insurance.

The legal lens that I wear is just automatically part of what I do. There are legal issues that the technology gives rise to. And those are issues that we have naturally had to deal with along the way. Our understanding of the technology, being supplemented by the legal understanding of all the various law firms that are working with our clients in the space, and that work with us in the space, have really helped us get past those challenges. 

They vary a lot depending on what the specific client does and what their priorities are. If you take an exchange or custodian, the theft of the customer assets is a huge exposure and is something that they love to insure. But if you take a data analytics firm, they aren't holding assets for customers. Instead, they're providing technology as a service. And so the cyber and technology errors and omissions component is a bigger priority. The insurance needs vary so much, depending on the type of business and that specific company's own priorities.

Exchanges, custodians, any company that holds third-party assets, their customer assets – their focus tends to be either on crime coverage, or custody coverage through the specie market [for insuring high-value assets] in London. DeFi [decentralized finance] companies are really just technology companies. Their technology supports a platform that they don't control. So from a DeFi perspective, the cyber technology errors and omissions component is an issue.

DeFi has become such a bigger part of the industry now than it used to be. Cyber insurance has become a greater focus for many companies in the space too, where it wasn't six or seven years ago. Things have changed, but each specific bucket of types of companies does have some specific needs. NFT companies, for example. You could break that down further if it's a platform and they actually custody the NFTs and you go back to the crime and specie coverage. If they're really just providing a technology, then their focus tends to be on the cyber technology errors and omissions side of things.