INSURTECH: NFT INSURANCE
How YAS MicroInsurance puts a price on non-fungible tokens
The insurtech firm is one of the first in the industry to insure NFTs.
YAS pioneered NFTY, an NFT insurance that protects digital assets from capital loss (Photo from YAS.com.hk)
I
nsurtech firm YAS MicroInsurance has done what many thought was impossible: putting a price on NFTs or nonfungible tokens—something a person cannot even get hold of. As one of the first insurtechs to give NFT insurance in 2021, Andy Ann, co-founder and CEO of YAS MicroInsurance revealed to Insurance Asia that pricing for NFT can be derived in a few ways, such as past transaction values. “First of all, NFT is a tangible asset, it is a smart contract, and we are insuring the smart contract on both theft and loss coverage. The pricing principle is similar to collectable insurance, which is priced in terms of premium and coverage. The premium pricing is based on risk levels calculations, and the coverage amounts up to x% of the asset is also standard practice. We target to lower 24 INSURANCE ASIA
Andy Ann
NFTs are the same as classic cars, therefore they needed an insurance solution
the premium when we scale up to a specific mass volume in the long run,” Andy said. In the An Emerging Sector: NFT Insurance article by Istanbul-based Gokce Attorney Partnership, nonfungible tokens are described as “blockchain-based cryptographic assets with unique identification codes and metadata that distinguish them from one another.” These are connected to each other through software codes in the form of what they call ‘smart contracts’. Embedded in these smart contracts are the terms and conditions to transfer NFTs. And of course, just like what Andy said, NFTs can represent both physical and digital items from works of art, real estate, music, or videos. The data processed on the field called “metadata”, determines what the NFT represents. According to Andy, all the NFTs
that they in YAS MicroInsurance have insured so far are on average 2-5 ethereum (ETH) with the bigger sizes ranging from 12-22 ETH. “As it’s a very new product, we have started to compute premiums at 20% of the NFT price and cover 90% of the purchasing price,” Andy added. Andy explained that the NFT market is currently growing at an accelerating rate. In 2020, the market was worth around $350m which ballooned to around a staggering $24b at the end of 2021. According to Andy, the initial idea of launching an insurance product for NFTs came from their partnership with several musicians, artists, exhibitions, and galleries. As the rapid growth in asset value of NFT grew, YAS believed that NFTs are the same as classic cars, therefore they needed an insurance solution. With that, YAS pioneered NFTY, a non-fungible token insurance that protects these digital assets from capital loss such as theft or malicious attacks on digital wallets and the digital marketplace. Unlike current insurance products that protect physical assets, YAS dedicated its policies to “digital collectables only” that are uniquely registered on the blockchain. As all the NFT data is stored on a public blockchain representing digital property rights, YAS’s contract insurance policies define the NFT values and fully insure at their market value. Need for protection Andy explained that this is the perfect time to launch this product because as the market for NFTs grows, so do attacks and thefts. “We have seen a handful of hacks such as the Banksy scam with fake banksy NFT was listed on Open Sea and sold for $350,000; hacks on Nifty Gateway; Evolved Apes; Bored Monkey Yacht Club phishing scam stole $2.2m; and most recently we
