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$69m. 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 $69m. 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.

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

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 monetises 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 US$69m 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.

The team at Insurance Business www.insurancebusinessonline.com.au

EDITORIAL

Managing Editor Paul Lucas Senior Editor Bethan Moorcraft

Journalists Danny Wood, Maria Hoyle, Mia Wallace, Surina Nath, Ryan Smith, Ksenia Stepanova

News Writers Lyle Adriano, Terry Gangcuangco, Roxanne Libatique, Gabriel Olano Copy Editor Clare Alexander

CONTRIBUTORS

Frank Scamarcia, Aytekin Tank ART & PRODUCTION

Designer Joenel Salvador Production Coordinators Kat Guzman, Loiza Razon Customer Success Coordinator Isabella Concepcion SALES & MARKETING

General Manager Peter Smith Commercial Development Manager Sophie Knight CORPORATE

Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

Editorial Enquiries paul.lucas@keymedia.com Subscription Enquiries subscriptions@keymedia.com.au Advertising Enquiries sophie.knight@keymedia.com.au peter.smith@keymedia.com.au

Key Media Australia (Insurance) Pty Ltd tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com

Sydney • Auckland • Manila • Singapore Denver • London • Toronto

Insurance Business is part of an international family of B2B publications, websites and events for the insurance industry

Insurance Business America cathy.masek@keymedia.com T +1 720 316 0151 Insurance Business Canada john.mackenzie@keymedia.com T +1 416 644 874O Insurance Business NZ alex.rumble@keymedia.com T +61 2 8437 47O8 Insurance Business UK gemma.powell@keymedia.com T +44 20 7193 0935 Insurance Business Asia peter.smith@keymedia.com.au T +61 2 8437 47OO