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Europe’s Insurance Regulator Wants 100% Crypto Asset Coverage — Here’s What It Means

The European Insurance and Occupational Pensions Authority (EIOPA) has recently proposed a new capital requirement for insurance companies that hold crypto assets. According to the proposal, these insurers would need to cover their entire exposure to digital assets with a minimum of 100%. This move is aimed at providing an additional layer of protection for policyholders in the event of market volatility or sharp price drops.

The proposal comes as a response to the growing presence of cryptocurrencies within insurance portfolios. While current levels of crypto holdings are relatively low, with crypto assets representing just 0.0068% of all insurance undertakings in the EU, EIOPA recognizes that this figure may increase in the future.

To achieve this goal, EIOPA recommends that insurance companies hold a minimum capital requirement equivalent to 100% of their exposure to crypto assets. This means that if an insurer holds €1 million worth of cryptocurrency, they would need to set aside at least €1 million in reserve as a precautionary measure.

While the proposal may seem restrictive, it is intended to be a preventive measure rather than an overly cautious one. EIOPA emphasizes that its 100% capital requirement should not be seen as an excessive burden on insurers, given the current low levels of crypto exposure. Instead, the regulator aims to ensure solvency and protect policyholders in the event of unforeseen market fluctuations.

The proposal is particularly relevant for certain jurisdictions within Europe, where insurance companies have taken a more active approach to incorporating digital assets into their investment portfolios. Luxembourg and Sweden, in particular, hold the majority of crypto exposure, accounting for 69% and 21%, respectively. Other countries, such as Ireland, Denmark, and Liechtenstein, also have notable but smaller exposures.

While some may view this proposal as overly cautious, EIOPA’s objective is to ensure that the insurance industry maintains its stability and reliability in the face of growing exposure to cryptocurrencies. The regulator aims to strike a balance between allowing insurers to adapt to changing market conditions and protecting policyholders from unforeseen risks.

In conclusion, the proposed 100% capital requirement for crypto asset coverage represents a prudent measure to safeguard the interests of European insurance consumers.

Source: https://bitcoinist.com/europes-insurance-regulator-wants-100-crypto-asset/