When it comes to cryptocurrencies, tokenization and digital assets, one key aspect is often forgotten: Insurance. In this interview, Mark Dambacher, CEO InCore Bank, and Rolf Langenbach, CEO Swiss Quality Broker, explain what digital asset insurance is all about.

Mr. Dambacher, Mr. Langenbach: Why is there a need for specific insurance for digital assets?

Mark Dambacher: As a bank, you generally have to insure yourself. We cannot exclude any segment, whether traditional or digital. For us, offering our customers maximum insurance protection is not least a question of reputation.

Rolf Langenbach: When new products and services join the established range, continuity and security are needed to establish them in the market and lead them to sustainable success.

So, where did the idea for Digital Assets Insurance come from?

Langenbach: lt meets a need. Whether in the B2B or B2C area, the banking client relies on his financial services provider to have an insurance solution with the appropriate coverage. We as Swiss Quality Broker have the task of developing suitable products.

Dambacher: I see it as an advantage that we offer the appropriate protection with Digital Assets- in contrast to providers who are active in the crypto sector but don't offer this security. The topic of insurance is so complex that it would be fatal to believe that a bank is capable of handling it itself. You need experts who can provide you with customized solutions.

What makes insuring digital assets so challenging?

Langenbach: Banking and ICT have been amalgamating visibly for years. The insurance merger is a challenge because insurers have separate departments and products for each area that are not aligned with each other. Uniting these two worlds into customized solutions has become even more challenging with the emergence of new technologies and new products. We like it because we are traditionally involved in banking and ICT, we are well versed in the field.

Does every InCore Bank client benefit from this digital assets insurance?

Dambacher: Yes. Clients don't have to do anything about it. The insurance is also not passed on to the customer as a fee. If the client stores his digital assets with InCore Bank, he automatically gets this security included. This is despite the fact that more and more providers are entering this market and the price war is intensifying.

Are providers obliged to take out appropriate insurance policies?

Langenbach: That's not the case. Even banks with a Finma license are not yet obliged to take out insurance for digital assets.

Even better for InCore Bank, which thus has a unique selling proposition ...

Dambacher: I would take it one step further. We afford security for the benefit of our customers and at the expense of our margin. There are certainly market players who do this differently.

Where are we today in terms of the level of limits for digital assets?

Langenbach: It is an interplay of insurance coverage and factors such as technology and security, compliance and governance. Nowhere in the world is it possible for a custodian to obtain coverage for five hundred million US dollars. Therefore, they must avoid or mitigate the risks through targeted measures and finally purchase adequate coverage. The work of the risk manager is of central importance.

Dambacher: Without preparation, without addressing and minimizing the risks, a financial intermediary will not receive coverage. In the end, it is a close interaction between banks, brokers as well as insurers under the motto: risk management first.

Is this a matter of purely technical risk management?

Dambacher: One looks at all aspects. It concerns the whole control framework of the bank. InCore Bank has defined well over four hundred checks, and furthermore, everything is reviewed by internal and external auditors. Risks are considered in terms of their probability of occurrence and the potential extent of the damage.

Thanks to these comprehensive audits, the risks are mitigated. It is essential for providers to understand the control system; otherwise, they will not be able to issue a policy.

This sounds like an intense collaboration ...

Langenbach: Insurers, brokers and customers bring their specific know-how, experience and experts to the table to develop a joint solution. Such large round tables are not typical for the insurance sector.

InCore Bank works with partners. What is the situation here in terms of risk management?

Dambacher: In addition to our outsourcer's technology, we also look at their risk management. And last but not least, we ask how well they are insured. This is where Swiss Quality Broker comes into play again: We are not only concerned with finding the right insurance policies, but also correctly insured partners.

Langenbach: Insurance coverage can certainly tip the scales when it comes to deciding in favor of one partner or the other.

Is digital assets insurance different from traditional insurance?

Langenbach: No. A token and a crypto coin are simply different types of security. Whether you steal a dollar or a token, the damage is the same; theft is a criminal act. There is a difference in the potential for risk; in this regard, policyholders and insurer companies are entering uncharted territory. This dynamic makes it more challenging, other than that it is the same.

Why is the range of digital assets insurances so small?

Langenbach: The market for digital assets is still comparatively small. Only a few financial institutions or technology companies are generating empirical values. These are important for insurers. The result is a manageable provider market with corresponding prices: The insurance of digital assets costs several times more than that of fiat currencies.

Despite these high premiums, InCore Bank offers this insurance for free?

Dambacher: That is a question of philosophy. Whether it's traditional assets or digital assets: I believe we should look at everything the same way. If we differentiate, this new area will never establish itself and will remain exotic. That's why we don't make a distinction when it comes to insurance either.

Speaking of which: Why is a distinction made, even though everything has long since been traded and stored digitally?

Dambacher: Many people are still trying to understand digital assets from a technological view. When I use the computer, I don't know how it works either. For me, digital assets are financial assets like others.

Langenbach: Technologies like blockchain are relatively new. I think in a few years, this topic will be a done deal for all participants.

Dambacher: I agree. From my and investors' point of view, the biggest risk is not the technology, but the volatility and the sometimes extreme reactions of the market.

Apart from volatility, where do you see the greatest risk in digital assets?

Dambacher: Fraud comes first, regardless of whether it comes from external or internal sources.

Langenbach: In addition to technological and procedural issues, insurance companies are also intensively dealing with fraud aspects. For example, how great is the probability of fraud if several people join forces? We try to make that impossible by taking specific precautions.

Will the attacks negatively impact or even stop the development of digital assets?

Dambacher: No, I don't think so. It's more likely that large countries will try to stop the development because they fear losing control over the currencies and thus losing power and influence. But they have long since lost this battle. The development is unstoppable because it is decentralized.

Are there aspects of digital assets insurance that are not given enough attention?

Langenbach: Directors & Officers Liability (D&O) is a hot topic, yet one that is neglected. The board of directors of a financial institution or technology partner entering digital assets is entering an unfamiliar field. It has to deal with technologies and services that it has mostly never been confronted with before. The risks are greater, which has an impact on insurance: Directors' and officers' liability is provided to only a few organizations.

The topic is currently quite hot, especially in the technology and start-up sector. In the context of storage, on the other hand, the market has developed positively because a lot has been invested in technology and the security frameworks are seen as mature. This example illustrates the connection between minimizing risks and offering insurance solutions.

Taking out insurance is one thing, claims management is another.

Langenbach: Our insurance provider has a claims department with experts from a wide range of fields, be they lawyers, computer scientists, forensic experts, etc. As a broker and as an insured company, it is valuable to know that you have a provider backing you who, in the worst case, not only helps financially but can also provide on-site support. No matter how well we organize and protect ourselves, a loss event is and remains a catastrophe, and we need more than someone who just gives us money.

Where does your offering currently stand?

Langenbach: We have provided InCore Bank with comprehensive insurance services for digital assets from day one and have continued to develop them. Today, we cover higher sums, accompany the entire life cycle, and insure additional services.

Dambacher: As soon as we entered the new market, we were insured for all eventualities – we didn't just buy any insurance, but developed the product based on our specific needs.

Was taking out digital assets insurance a criterion for entering this new market?

Dambacher: I'II be honest: no. The entry into digital assets is one of the pillars of our strategy. After the decision was made, we considered what was needed for a successful implementation. Insurance was one aspect that had to be taken into account.

What's next for digital assets insurance?

Dambacher: Education is key. The point is to explain what is insurable and what is actually insured in the first place.

Langenbach: At the moment, the focus is on finding new providers and on educational and lobbying work. We have to show that good service providers at the highest level exist in this young segment.

Dambacher: And that applies to both the insurers and the insured, i.e. the banks.

InCore Bank is a one-stop business-to-business transaction bank founded in 2007, providing banks, securities dealers, asset managers and fintech companies with first-class transaction banking and outsourcing services. As a Swiss corporation with a banking and securities firm license, InCore Bank offers a comprehensive and modular range of services covering transaction banking for traditional and digital assets, business process outsourcing, tailor-made white-label investment products and other services. This offering enables market participants to reduce complexity and focus on their core business.

  • More information about InCore Bank here

Swiss Quality Broker was founded in 2002 and is still an owner-managed Swiss service company. As a problem solver, we focus on complex individual business for corporate clients with a high demand for consulting and services. The high level of expertise of our employees at all levels as weil as state-of-the-art infrastructures enable Swiss Quality Broker AG to go the extra mile for its clients.

  • More information about Swiss Quality Broker here