Can Bitcoin back insurance? | Mass Mutual, Liberty Mutual

Real World Assets - April 15, 2021

Video Overview

Crypto can be collateral for insurance. This might seem absurd based on the volatile price of Bitcoin and DeFi tokens, but digital assets and insurance products can work together. This is exactly why insurers have warmed up to Bitcoin.

Last week, the New York Digital Investment Group (NYDIG) revealed plans of a Bitcoin-backed product. The NYDIG also raised $100 million from  insurers like Liberty Mutual, Mass Mutual, Starr and New York Life. This could set the stage for crypto-backed insurance.

Insurance companies are owned by their policy-holders. These are people like you and me who take our insurance for future protection. Insurance products, like any other investment, require decent returns. But most insurance companies invest in the bond market, which are giving dismal returns these days. This is why insurance companies are looking into high risk, but potentially high reward assets like Bitcoin and digital assets.

What this means is Bitcoin could be used as collateral for your life insurance. But it doesn’t end here.

Surety and DeFi

Bitcoin could go one step further. For industries that require contractual payments from parties, a surety bond is used. This is a financial product that ensures that party A pays Party B a certain agreed amount. For this, collateral is taken.

With Bitcoin being used for products like life insurance, surety bonds could be the next step. Once the crypto infrastructure advances and industries’ trust in the system is built, Bitcoin could be used as collateral for surety bonds.

This is setting the stage for yet another use-case for Bitcoin. And with the added functionalities of DeFi, insurance could become a focal point of the digital assets space.

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