Editorial

A problem worth pondering

Back in March, auction house Christie’s made headlines when it sold a piece of digital artwork via non-fungible token (NFT) for an astounding US$69 million. The groundbreaking piece, called “Everydays: The First 5,000 Days, ” is a collage of digital pictures taken every single day for 13 and a half years by a digital artist known as Beeple.

NFTs are a bit like one-of-a-kind trading cards on the blockchain. Every NFT is a unique token, and in the case of digital art, they’re designed to assign exclusive ownership of the work. What’s tricky to understand is how unique ownership of an NFT artwork could be worth $69 million. And given the distinct lack of insurance options available for NFT art, it seems underwriters are also struggling to wrap their heads around the value of these crypto assets and the best ways to manage NFT risks.

Technically, the owner of an NFT is the only person with the private encryption key for the asset, and as the blockchain is well known for its strong security, really the only foreseeable threat would be a very sophisticated cyber incident in which a criminal somehow gains access to the encryption key and monetizes the NFT for their own gain. While there are potential coverage options for NFTs on cyber policies today, there are many questions that need answering, including how and where collectors, galleries, and auction houses are placing custody of their NFT art, as well as multiple grey areas for third-party liability.

The NFT art trend raises interesting questions for the insurance industry. What other insurable assets will suddenly find their way onto the blockchain? Is the industry keeping pace with the evolution of blockchain technology and cryptocurrencies, or has it already fallen behind? What other intangible assets will need to be covered next? And who is going to take on insuring these assets?

Those questions, although challenging, provide an exciting opportunity for the insurance industry to stay relevant, exercise innovation and thought leadership, and shore up what’s looking like the next big thing in the digital asset landscape. The sale of a piece of blockchain-based artwork for $69 million has placed NFTs firmly on the public’s radar. Now the race is on for insurers to deliver solutions that will respond to the digital asset wave.

Is the industry keeping pace with the evolution of blockchain technology and cryptocurrencies, or has it already fallen behind?

The team at Insurance Business Canada www.insurancebusiness.ca

EDITORIAL

Managing Editor Paul Lucas Senior Editor Bethan Moorcraft Writers Lyle Adriano, Terry Gangcuangco, Roxanne Libatique, Pete Miller, Surina Nath, Gabriel Olano, Jonathan Russell, Ryan Smith, Ksenia Stepanova, Mia Wallace, Danny Wood Copy Editor Clare Alexander

CONTRIBUTORS

David Greenberg

ART & PRODUCTION

Designer Joenel Salvador Production Manager Alicia Chin Production Coordinators Kat Guzman, Loiza Razon Customer Success Coordinator Bernz Jalandoni

SALES & MARKETING

Senior Business Development Manager Desiree McCue Head of Insurance – Sales & Marketing Cathy Masek Vice President - Sales John Mackenzie Project Coordinator Jessica Duce

CORPORATE

President & CEO Tim Duce Office/Traffic Manager Marni Parker Events and Conference Manager Chris Davis Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Global CEO Mike Shipley Global COO George Walmsley

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