CAC Specialty adds crypto insureds to financial client list.

CAC Specialty broadens its cryptocurrency coverage

February 21, 2023 6:31 AM

CAC HQ.jpg — CAC Specialty's headquarters, 250 Fillmore Street, Denver.

Digital Insurance spoke with Tom Power, senior vice president, financial lines practice, CAC Specialty, an insurance risk solutions provider. Power joined the firm in August 2022 after 13 years at AIG, specializing in financial lines products. In his current role, he leads the brokering and placement of financial lines products for banks, insurance companies, asset managers and digital asset companies. As the financial industry gets more comfortable dealing with cryptocurrency, CAC is on the front lines of insuring that activity. Power spoke about CAC Specialty's approaches and strategy.

What are the cryptocurrency risks that CAC covers?

Tom_Power_CAC Specialty.jpg — Tom Power, senior vice president, financial lines practice, CAC Specialty

Some traditional companies and banks are dipping their toe into some crypto related activities. One type is traditional companies expanding the scope of services. We also have some crypto exchanges and some crypto wallets. We're a relatively new company [founded in 2019]. Many of us were at other shops and had been doing this for a couple of decades. We've been building a book over the last few years. The crypto companies that we have for the most part fit into either a crypto exchange or a crypto wallet company.

What coverages are offered, and how did CAC decide to offer those kinds of coverages?

The coverages that are offered are standard coverages that have been around for a while. But they require manuscripting and adjustment for the exposures crypto companies have. We have the classic chassis of management liability and professional liability coverages or fidelity bond and crime coverage, which is theft. We have E&O [errors and omissions], which is liability from the provision of professional services to customers. We have D&O [directors and officers] which covers the principals in your organization in any allegations of breach of fiduciary duty. Also employment practices, liability, discrimination and retaliation. We have fiduciary, operating 401(k) plans and other employee benefit plans. And cyber insurance for the data.

Also we're looking at companies that are just dedicated to the crypto space. Often they get a different underwriting experience than more traditional companies because they require more nuance.

Typically for most financial institutions or banking institutions, we'll cover anything they do for a customer -- any professional service, whether it's checking or market making or investment management. Whatever it is, it's covered under that form subject to different exclusions. In the crypto space, they want to be a bit more specific, like just covering their market making activity for customers. It still fits into the same chassis of coverages. It just needs to be molded and shaped to apply for this specific exposure.

What insurance products are you considering offering or developing?

E&O is the tougher part right now. Some D&O carriers are willing to look there.

We're really trying to push carriers to get more comfortable with providing more entity coverage, even if that requires certain restrictions to the coverage. We're trying to focus on getting more E&O coverage available, which probably affords greater regulatory exposures, or coverage for those types of exposures. There's very limited coverage for anything regulatory. There just hasn't been a willingness to cover that.

If you ask customers what's most valuable, it's risk. Firms are trying to transfer risk. They see opportunity if they've been able to transfer some of the risk. Even if it's expensive, we've been trying to engage with more carriers and trying to develop solutions that really get to what the client is looking for, which is to transfer more of an entity type of coverage or regulatory type of coverage, or potentially vicarious liability that comes from some of the services that are offered.

What are your goals for CAC’s financial lines practice?

There's a couple of north stars that apply not just to this sector, but more broadly. We want to be informed on the space, understand the issues and look at them through the same lens as our clients. Then frame solutions that work the best. We want to be the most informed [with] the best relationships, provide the best service and continue to be viewed as a go-to market specialist in many of these areas.

We have a lot of different specializations that focus on different areas. To date, we've been able to find more solutions, engage with different markets, and be thoughtful about how different risks translate into liability. It's really that broader value proposition that has proven out for the firms that we've engaged with and been able to secure some of these unique solutions for. The reason that firms will come to a CAC versus some others is because they want a bespoke approach. CAC is not going to have an assembly line or a shotgun approach, just engaging with anybody out there. We go to markets that demonstrate commitment to the space and try to understand the risks.

We know when we have carriers engaging here, they understand that there's going to probably be issues, a learning curve and potentially losses along the way, but they're willing to stick through it. They come for specialization, those relationships and understanding of that market and to get at the end of the day, a better product.