Launched in 2019, Breach is an emerging insurtech dedicated to developing insurance technology and products for the rapidly growing cryptocurrency market.
The company’s primary focus is to pioneer insurance products specifically tailored to address the unique risks associated with the cryptocurrency world, addressing the current market’s lack of tailored solutions.
Recently, the Bermuda Monetary Authority (BMA) granted Breach approval to establish a class IIGB insurer, marking a significant stride in the company’s mission to create innovative insurance products and enhance the security of cryptocurrency.
With the establishment of its new carrier, Breach gains the ability to underwrite emerging crypto risks while developing bespoke embedded products for crypto-native technologies. These groundbreaking offerings will be accessible through Breach’s proprietary InsurTech platform, which employs straightforward APIs to enable seamless integration of regulated insurance into partner technologies in a matter of weeks, rather than months.
Investors include RW3 and LightShed Ventures, Raptor, Foundation Capital, Road Capital, Republic Capital, and Alumni Ventures.
Today, the insurtech is continuing its expansion in the US marketplace and the company plans to enhance its proprietary insurtech platform to facilitate the introduction of commercial-grade products.
Breach has also successfully obtained a special IIGB license, exclusively designed for underwriting crypto risks. As a result, Breach is now permitted to operate natively in both cryptocurrency and traditional fiat currencies, enabling policy denomination, payment receipt, and claim settlement, all within the crypto realm.
We caught up with Eyhab Aeyjaz, CEO and Co-Founder of Breach, to find out more.
Can you give me an overview of how Breach came about, and how your background influenced you launching in Insurtech? Was there a particular moment that just inspired you to do it?
As a quick way of background, I’m the co-founder and CEO of Breach Assurance. Prior to founding Breach, I spent seven years at Liberty Mutual, helping them build new products and entering new markets on the traditional as well as non-traditional side. All of that experience was post-MBA. Before that, I spent 12 years in the energy industry doing corporate accounting, corporate finance, and internal audit.
When I was at Liberty, my curiosity and interest were piqued as I got to work on new initiatives, bring new products to market, and was an early employee of Liberty’s own A&H InsureTech. I learned a lot from industry veterans, and it was really cool to build version one of distribution strategies, version one of product and tech strategies, policy forms, and getting to work with actuaries on pricing.
In 2017, I kept hearing about cryptocurrencies and blockchain technology becoming more mainstream, and I looked at the problem of the chaos these hacks were creating, and no one was talking about insurance. I saw this as an interesting time in my career to make a bet and learn along with everyone else about this new industry, but bring something technical that I bring, which is regulated, reinsurance-backed conservative underwriting and creating net new insurance capacity for this sector. That was the inspiration for founding Breach.
It’s a market that is quite embryonic in many ways. How big is the market demand for crypto insurance right now? And, are other insurance industries taking this idea seriously?
The insurance industry absolutely has been taking this idea and the overall market seriously. You can see that by the leaning in of new markets that are supporting it, whether it be through Lloyd’s or, in some pockets, you’re seeing some rated paper as well, albeit for traditional lines, things that they know really well, like D&O, and in pockets E&O and cyber as well. But generally, I think an issue with controls and lack of maturing within the industry, whether it’s young founders without the necessary technical background or the ability to put internal controls in place, has been an issue.
The insurance industry is temperamental, where when things are going well, it’s easy to justify investing in the space. When things aren’t going so well, it’s harder to invest. The last year has seen insolvencies, which aren’t restricted to just crypto, obviously now that we’re seeing in the financial market as well, generally due to the lack of internal controls and risk management.
What new innovations have happened over the past year or so in the crypto market and how will that help the current situation with crypto and crypto insurance?
Over the past year, there have been many innovations in the crypto industry, but the biggest focus has been on the maturation of crypto. There has been a heightened focus on regulation, oversight, proper risk management, and cybersecurity.
This has made insuring crypto risks more feasible. More and more organizations are leaning into regulation and compliance to be a part of the best path forward. The recent FTX incident has impacted the industry, but it has also helped to highlight the importance of trust and insurance in the crypto industry.
For instance, a regulator like the BMA has been leaning into crypto and continuing its regulation activities even during the chaos. As a result, some organizations like the interviewer’s company have been formally approved as a full carrier, IIGB insurer out of Bermuda, which demonstrates the industry’s development and the regulators’ literacy in the space.
What is Breach’s take on the growth and change in the tokenization space and the growing use cases within the defi space, and in terms of ensuring against those risks?
Breach takes a very agnostic view of ensuring crypto and crypto risks. They don’t make a bet on any one type of technology or any one type of partner. They pick their spots where they believe there is a demand for insurance and an insurable risk.
They are optimistic about the various use cases and are monitoring the need for risk transfer. Breach is totally agnostic on the use cases and is focused on the product demands and needs within crypto. They will provide coverage for professional liability, director or officer liability, theft, and non-traditional crime policy.
What challenges, um, are you guys facing as insurers in the current crypto insurance space? What’s the biggest thing that’s kind of preoccupying you and that you are looking for solutions to?
I think it’s managing the noise, which is threefold: the crypto industry, regulators that seem to be on two sides of the fence when it comes to regulating crypto, and traditional banking. These things take up a lot of my personal time, and we’re always putting out fires and working with our investors to ensure we have the financial backing we need.
Fortunately, there are investors that understand and appreciate our value proposition and the deep expertise that we bring. We look at things with a level headed approach and focus on what we think will be here for a while. We raised a round of funding in the most complicated time ever and brought in tier one investors, which I think reflects positively on our picks and shovels type of business. Investors see us as focused on underwriting discipline just for this thing, and it’s been received well.”
Do you believe that the fact that Breach is doing something slightly different is a plus point in terms of the rest of the industry?
Yes, I think so. In fact, our recent fundraising round, which we intentionally did not announce, is a reflection of that. We want to be remembered for our innovation and capacity rather than just a round of funding. We picked a “picks and shovels” type of business, and I think investors appreciate that. We focus on underwriting discipline specifically for this thing, which has been received well.
Finding your niche demonstrates to investors, reinsurers, financial rating companies, and regulators that you have a core competency and are focused on it. You are not getting distracted by other stuff and are focused on what you are really good at.
What trends are you seeing emerging within the crypto insurance sector? What changes are we going to be seeing within the next 12 months?
I think the trend for the remainder of this year and next will be regulated decentralised finance insurance, and Breach will be in the middle of that. We are excited to be solving major pain points in the crypto industry that solve cybersecurity issues at the point of sale and transaction. More regulated insurance with more innovative capacity is coming, and we are not alone. There are others out there doing interesting things in regulated crypto insurance.
Interview by Joanna England
