Non-fungible tokens (NFTs) are a $41 billion market, and general insurance is available anywhere there are several zeros. That is not the case with NFTs, a segment of the bitcoin business worth less than 1% two years ago. However, with the announcement that IMA Financial, an insurance broker and wealth management firm, will invest in a research and development center to figure out how to assess risk and underwrite coverage of NFTs, the lack of coverage appears to be changing.
NFT is a difficult commodity to come by.
Gemini, Coinbase, and Crypto.com, three of the most popular cryptocurrency exchanges, each have coverage for assets in cold storage wallets worth hundreds of millions of dollars, while stock and cryptocurrency trading platform Robinhood has Lloyd’s of London coverage for its assets.
In March, reinsurance giant Aon initiated a trial program to give coverage to digital asset firms, partnering with CoinCover to provide hot wallet coverage.
The research “allows us to study the hazards associated with digital assets from within the metaverse, so we can better educate our clients to handle such risks,” according to Paul Washington, executive vice president of IMA Financial Group.
Because there is so much stealing, IMA Financial will have its work cut out for them. For one thing, NFTs are a difficult commodity to value because, like great art, they are only worth what the market believes they are — and that value is heavily influenced for insurance reasons.
Another issue is that they appear to be just as subject to theft and hacking as bitcoins. On Twitter earlier this month, an NFT collector claimed he had been hacked after being misled into clicking on a link that gave the thief access to his digital wallet.
His NFT collection, which included a dozen highly sought-after Bored Ape Yacht Club and Mutant Ape Yacht Club treasures worth over $2.5 million, was stolen and swiftly resold by the criminal for $700,000 before word of the robbery reached NFT marketplaces.
NFTS: artwork
NFTs are one-of-a-kind cryptocurrency tokens that may be used to store images, movies, and almost any other sort of content.
The files are stored in blockchains and are permanent. NFTs include artwork, NBA slam dunks, and CryptoPunk aliens with seven-figure, eight-bit visuals. The most expensive item, a digital collage by artist Mike Winkelmann, fetched $69 million at a Christie’s auction last year, despite the fact that the buyer did not obtain the piece’s original copyright or even exclusive exhibition rights.