Old Mutual warned on Monday that it will no longer insure computer equipment used for mining cryptocurrencies.
“Old Mutual Insure has opted out of insuring computer equipment used for cryptocurrency mining due to the unregulated nature of the industry, which is often associated with cybercrime, and its penchant for using modified electronic infrastructure that operates on a 24/7 basis, making it highly prone to overheating and other malfunctions,” the financial services company said in a statement.
It said it has begun advising its branches not to insure any businesses involved in crypto mining “following extensive industry research as well as an in-depth review of claims from clients that have already incurred losses to equipment used for cryptocurrency mining”.
“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 cybercrime,” said Old Mutual’s insurance expert Christelle Colman.
“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.”
Colman said 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”.
‘Comprehensive risk analysis’
Old Mutual said crypto-mining operations typically use devices that are not only expensive but can overload the CPU or graphic processing unit “as they are usually run at 100% capacity”.
“There is also the added complication that cryptocurrency mining is often associated with highly speculative trading activities, meaning the businesses involved can be prone to going bust,” said Colman.
“Old Mutual is currently conducting a comprehensive risk analysis of all clients involved in computer-heavy business activities as well as third-party service providers such as software developers and Web designers to ensure that they are not involved in cryptocurrency mining.” — (c) 2019 NewsCentral Media
