In the rapidly evolving digital asset space, insurance is not just a safeguard—it’s a necessity. With the increasing complexity of risks associated with digital currencies and blockchain technology, traditional insurance models are proving inadequate. To truly address the needs of institutional investors, crypto exchanges, and custodians, a new approach is required. Soter Insure is at the forefront of this shift, offering insurance policies denominated in native digital currencies like Bitcoin (BTC) and Ethereum (ETH).

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This unique model aligns with the nature of the assets being insured and solves several key issues that have plagued the digital asset insurance space, particularly the asset-liability mismatch inherent in fiat-denominated policies.

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Understanding Soter’s Innovative Model

Most traditional insurers that have ventured into the digital asset space have done so cautiously, offering limited coverage and demanding exorbitant premiums. A significant issue with traditional models is that premiums and claims are often denominated in fiat currency, even when the assets being insured are in digital currencies like Bitcoin or Ether.

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This asset-liability mismatch creates challenges on both sides of the insurance agreement. For policyholders, the value of their digital assets can fluctuate significantly relative to the fiat currency in which their insurance policy is denominated. This volatility can lead to situations where, for example, the value of a company’s digital assets increases substantially after a policy is purchased, but the fiat-based coverage does not adjust to reflect this new value. Conversely, when claims are made, policyholders may find themselves compensated in a currency that has depreciated relative to the asset that was insured, resulting in insufficient coverage.

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Soter Insure addresses this mismatch by denominating its policies in the same digital currency as the insured assets. For example, if a company insures its Ethereum holdings against the risk of slashing (a penalty imposed in Proof of Stake networks), any claims made under that policy would be paid out in Ether, not in fiat currency. Similarly, Bitcoin loss policies are settled in Bitcoin, ensuring that policyholders are indemnified in the same asset they sought to protect.

This approach provides several key benefits:

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1. Asset-Liability Matching: By matching the denomination of the policy to the asset being insured, Soter eliminates the risks associated with currency fluctuations, ensuring policyholders receive the full value of their coverage in the event of a claim.

2. Simplified Claims Processing: Denominating policies in the underlying asset streamlines the claims process, reducing the complexity involved in converting digital assets to fiat and back again.

3. Enhanced Risk Management: For institutional investors and crypto exchanges, this model provides a more predictable and reliable form of coverage, aligning their risk management strategies with the volatility of the assets they hold.

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Tailored Solutions for the Web3 Ecosystem

Soter Insure offers a suite of products specifically designed for the Web3 ecosystem. These include coverage for Directors & Officers (D&O) liabilities, Asset Loss policies, and Slashing insurance for Proof of Stake validators. Each of these products is tailored to meet the specific risks faced by institutional players in the digital asset space.

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For example, the Slashing Insurance offered by Soter protects validators who are penalized due to network failures or mistakes in Proof of Stake protocols. Since validators are paid in the native currency of the blockchain they support (such as Ethereum), denominating the insurance policy in the same currency ensures that any claims are directly aligned with the validator’s economic interests.

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Soter’s approach to insurance extends beyond simple risk transfer. By collaborating with leading custodians and blockchain technology providers, the company is creating a comprehensive ecosystem of risk management solutions that integrate seamlessly with existing blockchain infrastructures.

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Backed by Industry Leaders

Soter’s innovative approach is supported by major institutional backers. WebN, an affiliate of Brevan Howard, and Further Ventures, a fund backed by Mastercard and Abu Dhabi’s Lunate, provide the financial and strategic backing that gives Soter the resources to lead the digital asset insurance market. This level of institutional support ensures that Soter has the liquidity and expertise necessary to scale its offerings and address the increasing demand for tailored risk management solutions.

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With regulatory environments like the UAE and Hong Kong mandating insurance for Virtual Asset Service Providers (VASPs), the need for digital asset insurance is only going to grow. Soter’s crypto-denominated model positions it as a pioneer in this space, offering a solution that bridges the gap between the traditional insurance industry and the new world of decentralized finance.

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A New Era for Digital Asset Insurance

Soter Insure’s model of denominating policies in native digital currencies marks a significant departure from traditional insurance practices, addressing the specific needs of the digital asset economy. This innovation offers greater financial stability to policyholders, protects against volatility, and ensures that coverage accurately reflects the value of the assets being insured.

As the Web3 ecosystem continues to evolve and expand, Soter’s unique approach is set to redefine the role of insurance in the digital asset space, making it an essential partner for institutions navigating the complexities of blockchain and cryptocurrency risk management.

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Interested in learning more about our offerings or joining the team? Contact us!