Jacqueline Quintal is the current Managing Director & Financial Institutions Practice Leader at Aon. She works with financial institutions to address exposures as well as tailor risk transfer and consulting solutions in management and professional liability, cyber, property, casualty, environmental, lender placed insurance, health and benefits, due diligence, transactional solutions, operational risk, talent and compensation. In addition to working with traditional banks, insurance companies, asset managers, and other financial institutions, Quintal has a focus on emerging exposures for fintech firms. She is a frequent speaker at industry events and is the sole broker representative on the New York Department of Financial Services’ (DFS) State Insurance Advisory Board.
Christopher P. Skroupa: Briefly, what is blockchain? What is the impact of the disruptive technology, more specifically regarding its potential applications?
Jackie Quintal: Blockchain is, in its essence, a decentralized digital ledger on which transactions are recorded and verified, both chronologically and publicly. It’s tamper-proof and virtually instantaneous. The technology stores transaction data, for which no single, central party is responsible. For this reason, blockchain is a distributed ledger technology, or DLT. Benefits of this technology include increased transparency, faster transaction speed and improved efficiency. The technology is disruptive because of its potential to eliminate mass amounts of record keeping and to replace manual processes. Blockchain technology has a variety of use cases, both for financial transactions and in other industries including energy and utilities, healthcare, supply chain, transportation, and many more.
Skroupa: How does blockchain technology transfigure into cryptocurrency?
Quintal: Blockchain is the underlying technology that enables cryptocurrency, including its movement and exchange. Essentially, a cryptocurrency is a decentralized alternative to fiat currencies, which are backed by central banks. Cryptocurrency is a digital medium of exchange that uses technology to generate money and to secure and verify transactions.
Skroupa: Who are the key stakeholders in the cryptocurrency market?
Quintal: The cryptocurrency industry has several key stakeholders. This would include the exchanges upon which cryptocurrencies are traded, the miners who validate the transaction process, the custody companies who store cryptocurrencies for clients as well as institutions and the general public who conduct cryptocurrency transactions daily. Further, some central banks in emerging or unstable economies consider cryptocurrency as a viable alternative to or supplement for volatile currencies.
Skroupa: Why is it necessary to insure cryptocurrencies?
Quintal: Corporate insurance, of physical and intangible assets, along with protecting companies and their Board of Directors from regulatory exposures and shareholder litigation, has become a best practice across global industry. Insurance, deployed and structured correctly, serves as balance sheet protection and an efficient risk transfer. That said, there have been a considerable number of well publicized thefts of cryptocurrencies. As hackers become increasingly sophisticated, both in the established world of financial services and in a crypto context, it is valuable for firms to understand vulnerabilities, risk control and insurance solutions.
Skroupa: How can insurance companies underwrite the risk of theft of these assets?
Quintal: Insurance markets are starting to embrace the opportunity to insure cryptocurrency related exposures. This includes insuring theft of assets, offering protection to companies and their Boards of Directors, as well as addressing a variety of other business issues ranging from business interruption to errors and omissions, technology service obligations, and contractual issues.
Aon has been working with insurers to develop and refine innovative, risk transfer solutions for companies that transact in, hold or own cryptocurrencies with a focus on increasing the amount of available capacity and creating price competition. Important risk factors that underwriters will study include management team experience and expertise, security and storage protocols, financial crime concerns (e.g. Anti-Money Laundering and Know Your Client), relationships with legal counsel, accountants and banking partners as well as regulatory strategy.
Skroupa: What is the current outlook on cryptocurrency-related crime?
Quintal: There are no indications that cryptocurrency related crimes are abating; however, this is not materially different from fiat-related crime. It has been reported that in the first half of 2018, cryptocurrency exchange thefts (totaling $1.1Bn worth of stolen crypto) have tripled the amount of crypto thefts reported in 2017. Given this development, it is imperative that companies develop robust and state of the art security measures to protect their assets. It is just as important to insure against unforeseen disruptions and thefts.
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