Major Pan-African insurer cancels coverage for mining equipment

Pan-African insurance company Old Mutual has decided to exit the insurance business for cryptocurrency mining equipment due to a lack of regulation in the sector, the company reported June 10.

Pan-African insurance company Old Mutual has decided to exit the insurance business for cryptocurrency mining equipment due to a lack of regulation in the sector, the company reported June 10.

After a thorough study of the industry, Old Mutual decided not to insure equipment used for cryptocurrency mining because the industry is unregulated.

Among other reasons, the company pointed to fraudulent activity involving cryptocurrencies, as well as modifications to the mining equipment electronic infrastructure that caused overheating and other malfunctions.

Christelle, insurance specialist at Old Mutual, said: “We have chosen not to provide cover for this type of risk as it is tricky to conduct a proper risk analysis for a nascent, unregulated industry that is already on the radar of financial authorities due to its unfortunate links with money laundering and cyber crime. It is also a highly volatile industry that attracts a lot of speculators and therefore the local market does not have a proper risk rating structure for this type of risk. Even taking a full inventory of the equipment being insured is difficult as the value of highly modified computer equipment is often inflated and almost impossible to verify as it is often imported from unknown suppliers in the Far East.”

Old Mutual released an annual Savings and Investment Monitor survey for South Africa last July, asking respondents about their awareness and attitudes toward cryptocurrencies in the country. The survey showed that respondents were generally positive about digital currencies, with 38% agreeing with the statement “I wish I had invested in (cryptocurrencies) before” and 71% agreeing that “you can make a lot of money with them.”

Meanwhile, 43% of respondents agreed with the statement "They are bad news, like a pyramid scheme," and 53% said they don't understand how cryptocurrencies work. In terms of overall awareness, 40% of respondents said they have some level of awareness of cryptocurrencies, while 60% said they have no idea about them.

As Cointelegraph reported in January, the South African Reserve Bank published a consultation paper assessing the benefits and risks of cryptocurrencies. In the paper, the South African government clarified that it was not planning to ban either cryptocurrency trading or crypto payments at the time.