Major Pan-African Insurance Firm Rolls Back Insurance for Crypto Mining Equipment
Pan-African insurance company Old Mutual has opted out of insuring cryptocurrency mining equipment due to the absence of regulation in the industry, local technology-focused new outlet ITWeb reported on June 10.
Following comprehensive research of the industry, Old Mutual has arrived at a decision not to insure equipment used for digital currency mining because of the unregulated nature of the industry.
Among other reasons, the company also named cryptocurrencies’ exposure to fraudulent activity and modified electronic infrastructure of mining equipment that leads to overheating and other malfunctions.
Christelle Colman, an insurance expert at Old Mutual, said that “we have chosen not to provide cover for this type of risk as it is quite tricky to conduct a proper risk analysis of an unregulated fledgling industry that is already on the radar of financial authorities due to the unfortunate association with money laundering and cyber crime.” Colman added:
“It is also a highly volatile industry that attracts a lot of speculators so there is no proper risk rating structure in the local market for this type of risk. Even doing a comprehensive inventory of the insured equipment is difficult because the value of the highly modified computer equipment is typically inflated and almost impossible to verify as it is usually imported from obscure suppliers in the Far East.”
Old Mutual released an annual Savings and Investment Monitor survey for South Africa last July, which polled respondents on awareness of and attitude toward cryptocurrencies in the country. The study showed that respondents generally had a positive regard of digital currencies, with 38% of respondents agreeing with the statement “I wish I had invested in [crypto] before” and 71% agreeing that “You can make a lot of money with them.”
At the same time, 43% of respondents agreed with the statement “They are bad news, like a pyramid scheme” and 53% said they do not understand how cryptocurrencies work. In terms of overall awareness, 40% of respondents answered that they were aware to varying degrees, while 60% said they were not aware of cryptocurrencies.
As reported in January of this year, the South African Reserve Bank issued a consultation paper assessing the benefits and risks of cryptocurrencies. In the paper, South Africa’s government clarified that it did not intend to ban either cryptocurrency trading, or crypto payments at the time.