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NFTs Present New Challenges for Insurers

AM Best Audio’s podcast addresses how nonfungible tokens, a non-interchangeable unit of data stored on a blockchain, is insured and how NFTs can be protected in the future.
  • John Weber
  • March 2022

Nonfungible tokens, or NFTs, are fetching eye-catching prices these days. But they also present new challenges for insurers.

AM Best Audio recently spoke with Mary Pontillo, national fine art practice leader at Risk Strategies, and Rob Rosenzweig, national cyberrisk practice leader at Risk Strategies, about how the non-interchangeable unit of data, which is stored on a blockchain, is insured. Following is an edited transcript of the interview.

Art is insurable. Is digital art insurable?

Pontillo: We almost consider any digital art something that's shown on a computer screen, a TV screen that has some programming behind it. Those things are insurable and have been around for quite a long time.

Related: Cryptocurrency: Insurance Industry Tests the Waters With New Initiatives

Does this fall under cyber liability perhaps?

Rosenzweig: If there's unauthorized access to wherever the NFT is being custodied, that certainly would be a triggering event under a cyber policy. I can foresee situations where the digital asset is in some way corrupted, altered in a way that could trigger elements of a cyber policy.

But if the real concern is the actual loss or theft, the private key being compromised, I would view that more akin to a traditional crime loss because we're really, at the end of the day, talking about the loss of a physical asset—money, securities, other tangible property.

Do you see a market for insuring NFTs?

Pontillo: Long cold-storage custodians like Malca-Amit have been able to insure NFTs after they've secured the crypto insurance. That means that those custodians have really been well vetted by their underwriters.

One could say, “If that custodian is so well vetted, do you even need the insurance anymore?” But at least that's a mechanism by which you can protect your investment.

Related: Insurtechs Boost and Breach Launch Cryptocurrency Insurance Product for Individuals

Now, one of the problems that we see is valuation because, in the NFT and the crypto market, the values are all over the place on any given day. Malca-Amit has some appraisal solution that they're being very secretive about. I'm not exactly sure what that is yet.The other option that we do see that's been developed recently is for dealers or auction houses where they can purchase coverage for their hardware wallet, a physical hardware wallet, with the NFTs included on it. In that case, it's an actual physical device. Then it gets us back in line with that physical loss or damage aspect of the fine art insurance marketplace.

How fast do you think this is going to change?

Pontillo: It changes monthly, weekly with every submission we put in. As quickly as people are creating the marketplace for selling these in more traditional places, like auction houses that are well known and galleries that are well known, we're seeing the need and the requirement for underwriters to get creative and provide some sort of solution. It's changing almost daily.

AM Best Audio

Click here to listen to the interview with Mary Pontillo and Rob Rosenzweig.

John Weber is senior associate editor. He can be reached at

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