1. Forms
2. CR
3. CR-25-45

What the Form Is

The CR 25 45 "Include Virtual Currency As Money" endorsement is designed to modify standard Commercial Crime coverage forms and policies. Its primary function is to explicitly add coverage for losses involving "virtual currency" by amending the definition of "money" to include various forms of digital or cryptocurrencies. This endorsement is crucial because traditional crime policies often exclude or do not adequately address losses of virtual assets. The endorsement also provides terms for how losses of virtual currency will be valued. It is specifically intended for use with the Employee Theft and Computer and Funds Transfer Fraud insuring agreements.

Classes of Business It Applies To

This endorsement is pertinent for a wide range of businesses that are increasingly interacting with or holding virtual currencies. Examples include:

• E-commerce and Online Retailers: Businesses that accept cryptocurrencies (e.g., Bitcoin, Ethereum) as a form of payment for goods or services. For instance, an online electronics store that allows customers to pay in Bitcoin would need this endorsement to cover the theft of that Bitcoin by an employee.
• Financial Technology (FinTech) Companies: Businesses involved in developing or providing services related to digital assets, blockchain technology, or cryptocurrency exchanges.
• Investment Firms or Businesses with Digital Asset Holdings: Companies that invest in or hold virtual currencies as part of their financial portfolio.
• Any Business with Employee Access to Virtual Currency: Organizations where employees manage or have access to company-owned virtual currency wallets or accounts.
• Businesses Susceptible to Computer Fraud Involving Virtual Currency: Companies that could be targets of fraudulent transfer schemes involving their virtual currency assets.

Special Considerations

• Addressing a Coverage Gap: Standard commercial crime policies often contain exclusions or definitions of "money" and "securities" that do not encompass virtual currencies, creating a significant coverage gap. This endorsement directly addresses that gap.
• Valuation of Loss: Virtual currencies are known for their price volatility. This endorsement typically includes provisions on how the value of lost virtual currency will be determined at the time of the loss, which is a critical aspect for both the insurer and the insured.
• Specific Insuring Agreements: It's important to note that CR 25 45 is designed to amend only the Employee Theft and the Computer and Funds Transfer Fraud insuring agreements. Losses of virtual currency under other crime insuring agreements may still be excluded.
• Evolving Risk Landscape: The world of virtual currencies is dynamic, with evolving technologies and regulatory frameworks. This endorsement represents an effort by the insurance industry to adapt to these new risks.
• Alternative Endorsement: A similar endorsement, CR 25 46 Include Virtual Currency as Money, is available but applies only to the Employee Theft insuring agreement, offering a narrower scope of coverage.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters must thoroughly evaluate the applicant's exposure to virtual currency risks. This includes understanding the types and amounts of virtual currencies handled, the security measures in place for storing and transacting virtual currencies (e.g., use of cold storage, multi-signature wallets, hardware wallets), internal controls to prevent employee theft, and protocols for authorizing virtual currency transfers.
• Pricing Considerations: The unique risks associated with virtual currencies, including their volatility and susceptibility to sophisticated cyber theft, should be factored into the pricing of this endorsement.
• Educating Clients: Agents should proactively discuss virtual currency exposures with their commercial clients, especially those in technology, finance, or e-commerce sectors. Explaining the potential coverage gap in unendorsed crime policies is crucial.
• Underwriting Guidelines: Insurers may develop specific underwriting guidelines for this endorsement, potentially requiring detailed information about the insured’s cryptocurrency operations, security audits, and loss history related to digital assets.
• Clarity on Valuation: Both agents and underwriters need to have a clear understanding of the endorsement's provisions regarding the valuation of virtual currency at the time of a loss to set proper expectations with the insured.
• Scope of Coverage: Ensure the insured understands that this endorsement typically only modifies specific insuring agreements (Employee Theft and Computer and Funds Transfer Fraud) and does not provide blanket coverage for all types of virtual currency losses.