Welcome to the podcast hosted by the Association for Women in Cryptocurrency, sponsored by
Bracewell LLP. Bracewell is a leading law and government relations firm whose award-winning
teams lead the market in cutting-edge transactions and litigation, regulatory matters, and government
relations. You can learn more at Bracewell.com. Today's topic is super sexy, crypto insurance.
Learning in everything you would want to know about the industry and why it's important.
The Association for Women in Cryptocurrency is a global professional network of women
and male allies around the world who advocate for the equitable inclusion of women in the
future of digital finance, blockchain technology, and Web3. The views of the speakers are their
own and do not necessarily represent those of the association, its sponsors, or its
board of directors, or their employers. This podcast is our opportunity to showcase the
incredible work being done by our members around the world in the crypto blockchain and Web3
industries. I'm your host, Amanda Wick, founder and CEO of the association, and I'm incredibly
excited to introduce you to today's guests, Cara Owens and Sarah Downey. Cara Owens is
an advisor for proof and part of the reinsurance team at Stone Ridge Asset Management. Her
previous roles include underwriting and risk management leadership roles at a Fortune 500
insurance company, Markle Corporation, and the largest reinsurer in the United States,
Trans-Re. She's on the board of the longest running women's insurance association, APIW,
the Association of Professional Insurance Women. Not our older cousin, but could be,
which I love.
Sarah is the Lockton US Financial Services Head of Operations and Blockchain Digital
Assets Advisory Leader. As the Blockchain Digital Assets Advisory, or LEAP, Lockton's Emerging
Asset Protection Team Leader, she's focused on positioning Lockton as a trusted advisor,
thought leader, and solution developer for ensuring Blockchain and digital asset companies
and the risks they face. Lockton has successfully placed insurance coverage for a number of
Blockchain companies, including trading platforms, exchanges, lenders, decentralized finance
companies, mining companies, wallet providers, market makers, liquidity providers, investment
managers, asset managers, private equity venture capital firms, custodians, payment platforms,
Blockchain technology incubators, NFT platforms, and others, possibly including an association
for women in cryptocurrencies. We are incredibly excited to have these two subject matter experts
here and ITs about insurance being sexy because, like I told you guys in the prep call, my
parents used to do insurance. I grew up on this. If you don't think it's sexy, I promise
you by the end of this podcast, we're bringing sexy back to insurance, or at least crypto
insurance. Let's just jump right in. Ladies, can you tell me, I covered that you're from
Lockton and Proof. Sarah, if you want to start, just tell us who Lockton is and then
Kara want to hear from you too. Yeah, sure. Thank you, Amanda. Lockton is an insurance
broker, so we don't actually provide insurance to companies, but instead we're the middle
man, we're the facilitator. We work with all types of companies. My team works with companies
in the digital assets space. We help companies understand their risk exposures and then we
help them find the right insurance carrier partners to transfer those risks. And we're
lucky enough to get to work with insurers and MGA's like proof. You literally stole
the words out of my mouth, but Kara, please go ahead and tell us who proof is. Thank you
for having me here and Sarah, it's always great to see you. We're always low working
with Lockton. Proof is on the insurance providers. I know, and I did want to say Sarah, instead
of a middle man, Lockton's a middle woman, we should start saying. So true. I thought
that. I love that you said that. I was like, when can I get that in there? And Kara's
like, fall or see. But proof is on the other side. So we work with Sarah as a broker. We
are an actual insurance provider, so we are taking the risk on, we are providing insurance
policies to a number of digital asset companies. We also provide insurance policies to other
emerging tech providers like AI and robotics as well. We're up to five million in policy
limits. We're a subsidiary of Stone Ridge and Stone Ridge is an affiliate of NYDAIC, which
is a Bitcoin-focused financial services business. And we'll get into some of the different types
of policies and companies that we're working with later.
Yeah, I think I live as a former prosecutor. Sarah knows this, I say all the time, but
I live in a world of analogy and metaphor just because that's kind of where you have
to live explaining things to jurors. But in my experience, I think most people don't
think about this, but they've probably experienced in the form of homeowner's insurance. And
I had a complicated 100-year-old home brick house in Missouri that I had to go to a broker
for because if I had just called 100 different insurance companies asking if they would ensure
a 100-year-old brick home in an earthquake zone, that would have been a giant waste of
my life. And instead, I could call a Sarah who said, let me just call the person I know
who does that and save you tons of hours of your life. And so at its basic function when
I met Sarah, I was like, oh, I understand that. I had an insurance broker for my home,
and so I think it's an easier model to understand that it's just kind of at the corporate level,
at the business level, at certain types of policy levels. I think it's really relatable.
I'm just curious because I know my parents' origin story, but I'm curious about yours.
How did you guys get into the insurance industry?
I'll go first here. I'm a bit of a weird one. A lot of people sell into the industry.
I actually majored in risk management insurance, which is extra nerdy. I didn't mean to, to
be fair. I went to Temple University in Philadelphia in order to graduate with a degree. Is that
where your parents went?
I was literally about to say, you are the reincarnation of my mother who has this identical
origin story who went to Temple University undergrad with my dad and literally chills
her running down my spine because I'm like, this is going to be like the tales of my childhood
when she would tell me the exciting stories of risk management and how it was the coolest
profession ever. And I'm like, I am so here for this. This is amazing.
I definitely need to meet your parents. I'm very excited about that. In order to graduate
with a business degree, you had to take the intro to risk class and the professor was
amazing and we had to do a case study and I got to do risk management. We picked the
New York Yankees as our company, which is technically by not a company, but we had to
do risk analysis of what could happen to the New York Yankees.
And then one of the insurance companies travelers gave me a scholarship and I was like, all
right, this sounds like a great major. I get to assess the New York Yankees and I get free
money. So I rolled with it and then had a few different internships throughout college
and ended up accepting my first full-time job at a re-insurance broker in New York City.
I think anytime that you can say the words in your career, free money and New York Yankees,
you are doing something right. You are on the right path. I would have followed that
path as well and I'm not even a Yankees fan, but I do love daytime baseball and hot dogs.
So, Sarah, what about you? How did you get into it?
My story is not nearly as sexy as Kira's, but I thought I was going to date myself by
saying they didn't have insurance classes in college back when I was there, but clearly
I'm wrong. I am totally not your typical insurance person. I actually am a lawyer by background
and after I graduated from law school, the career counselor at my law school introduced
me to a friend of hers who was a practicing insurance attorney and so I just ended up
falling into insurance. I practiced law for nine years, mostly on the insurance claim side
of things, also doing a ton of coverage litigation. So in court all the time, which just was the
best. That was a super cute love of mine. Practiced for nine years and then actually
moved over to an insurance broker where a couple of years into that I actually started
doing the digital assets. I fell in love with it. So more to come on that.
As a recovering lawyer as well, I empathize with all of that. And I actually have a friend,
Monica Parker, who used to do coaching for attorneys who didn't really like the law part
into getting to other things. And I always told her she was like a decade ahead of her
time because it was hard to do that back then. It took a lot of courage to say, I'm going
to take this law degree that I spent oodles of money on and do something else. So I'm
always super impressed with people who had the bravery to do that earlier. Not that it's
like you should do it, but when you feel like the inclination and you make something amazing
out of it, it's a beautiful thing that I don't think people realize is actually a little
hard because of how well trod the lawyer path is and how difficult it is to kind of climb
out of it against and swim upstream instead of down.
I like the coverage litigator to risk matchmaker. Yeah.
Is that right? I think it's a natural thing. I mean, Sarah, tell me if you're wrong, but
I hear this a lot. You see this a lot, especially from like, at least in my experience with
M&A attorneys or finance attorneys who spend so much time on like the litigation side.
And then they're like, well, I could do the finance side and be really good at knowing
what not to do wrong because like I put these deals together. And so I've seen people make
that move from like the lawyer aspect of the business side to the business side. And it
does take like a certain kind of extra entrepreneurial spirit and business sense that a lot of lawyers
don't necessarily get training in or don't naturally pick up on. So I always kind of
say, I feel like those people are like lawyers plus, you know, it's like they had a legal
acumen, but they actually had enough business acumen to be able to do both well.
The interesting thing about you guys is that you're both not just an insurance, but you're
kind of in like the crypto insurance space, which is obviously why you're on a podcast
called Women in Crypto. But how specifically did you get into like digital assets? And
is there anything different or exciting about the digital asset space compared to maybe
the other spaces you used to be in?
My story, it's a long story, so to chat is short in it. I was at a competitor of Lockdyns
for seven years and I started there as a claims attorney. So never really left the law side
of things, but we formed a group. I think it was back in 2017. So, you know, we decided
we needed to understand blockchain technology and cryptocurrency and was just an area as
a broker we needed to follow and invest time in. And so we formed this working group and
a couple of weeks in, I saw my boss's boss at the time in the hallway and I went up
to him and I said, look, I have a job already. I don't want to be part of this group because
I could see that it wasn't going to succeed. It wasn't going to do very much. There was
no structure to it. And he said to me, he said, you're going to meet you a week from
now in my office and you're going to tell me you're leading our digital asset team.
And I said, no, no, no, I already have a job. I'm a claims attorney here. And he said, no,
no, no, I'm telling you a week from now, you're going to tell me you're leading the team and
needless to say he is quite compelling. And a week later, we were actually in a conference
room and it was decided that I was going to lead the digital asset team back at my prior
employer. And it was the best thing ever that boss's boss is now my direct boss here at
Locked In and I followed him here. And I thank him all the time for pushing me to do something
that was outside of just my normal selves because what really excites me about the space
and it is very different than working with traditional companies, everyone is so creative
and innovative in the digital asset space. And there's this feeling of China, for the
most part, trying to work together to help the ecosystem fries. Traditional companies
are a little different because they've been around for so long. So you don't have that
newness and freshness. And so to me, the digital asset space is just the best, best space to
be in.
I think you summed that up so well. And I wish people could see our heads nodding like
Kara and I are just like bobbing like up and down, absolutely. But I hear that so often
from so many different corners of the ecosystem. I think people don't understand that's why
so many of us love to work in this industry because even those of us that say we're crypto
agnostic and we're enthusiastic but cautious, underlying all of that is a constant impressness
or enjoyment of a bunch of people who are at least willing and open to have the conversation
of is this a better way? Is there a better way to do this? Can we make things better?
And I think that is such a heady thing to be around that it's why so many of us love
it. And we talk about it all the time in the association that no matter what role somebody
has, it's what bonds us as an industry and why crypto blockchain Web 3 is so different
is you could be BD, you could be insurance, you could be a lawyer, you could be a founder,
but we're all in this to steal airy redboards term, the cryptoverse together, like building
things and you can feel that it's like it's palpable. But Kara, what about you? Was it
like Yankees to Coinbase or was it just a straight line?
Mine's a little bit of a definitely a zigzag of a kind of line where I was lucky enough
to join Stone Ridge and Stone Ridge has a city area with proof. We're actually just starting
proof when I joined. So I was helping to write the policy forms and when I work with a proof
team, I'm very much learning every day. And at Star Point, we're a very creative industry
and it's more exciting working with the digital assets space and what I'm looking at other
industries that are not as exciting and kind of been around for a long, long time. But
yeah, I was lucky enough. I am definitely not a crypto expert. I know more than the
average person, but I am learning a ton by working with everyone at proof. And there's
just a lot of crypto knowledge throughout all of Stone Ridge and we used to have a Bitcoin
fund and we also have a sister company with IDeg.
You touched on something where you said it's like a really creative industry. And I think
people don't understand or appreciate that about insurance. They think insurance is really
boring. And going back to something that you said earlier about your risk management class,
I was probably one of the few kids who had a mother that would tell stories about how
exciting it was to do worst case scenario planning in risk management. She later went
on to become the first risk manager of the University of Pennsylvania. I mean, my mom's
story is like incredibly inspirational, but she's the ultimate nerd, which is one of the
many, many reasons that I love her. But she would do this thing where she would say, you
know, in risk management, you just imagine you're walking along a sidewalk. Is the sidewalk
wide enough? Like what if somebody slipped and fell? What's on the side of it? Does it
cushion them? Because if their face plant hits and they knock out their front teeth,
you're paying for those teeth. So what does the sidewalk need to be? And I'm like, what
does life look like like that? Right? But it's just such a fascinating thing that there's
like these people who think of these things. And I think in tech, people don't necessarily
think about insurance. But I guess my question to start off, and one of the reasons I was
so excited to do this podcast is I would love for both of you to explain why insurance matters
so much, especially in an industry like this.
I mean, I think it's protection when you need it the most, right? Usually if you're going
to have an insurance policy paying out, it's one of the darkest times of your life, but
something's going wrong, right? And you need somebody to be there to help you out. It's
not just a payment. It's also, it depends what your, what kind of policy you're buying.
So cyber, for instance, is a lot of risk management and prevention going on. So the cyber insurance
care will actually work with the broker and work with the insurance to make them a safer
risk and to make sure that they're going to be, or potentially not have a ransomware
attack happen when it could have happened because they were so insecure. So you can
help them to actually become a safer company and prevent something from happening or say
something doesn't have happened and a cyber attack happens, then you're working with them
after the fact as well. So you have a number of different vendors that are helping to see
what exactly happened from a cyber attack side and try to mitigate it as much as possible
so the loss isn't so big. But if you think of not even cyber, but just like hurricane,
like any company doesn't have to be a digitalistic company, but you have some terrible event that
happens and then the insurance companies are there to help out in that time of need. I
think it's just definitely something that's needed in society and it keeps small businesses
in business and it keeps personal individuals ability to rebuild their home. So their insurance
is important so many different ways.
I think people have a tendency to be conditioned like you mentioned hurricanes. I'm from Southwest
Florida. My parents house is actually still not done from the hurricane that hit back
in 2021, I think 2022. But it's interesting to me how in some ways we're conditioned to
be very aware of these very obvious things like weather events, right? Like, oh, absolutely,
this is going to happen and I need to have hurricane insurance and flood insurance and
homeowners insurance. And of course I need to have car insurance. Most states require
it, right? And so I think we're conditioned in some ways where we've been told worst case
scenario planning.
But I think for businesses, it's really hard to envision every horrible thing that could
happen, especially if you're like a founder and you're thinking about all the positive
possibilities and you're just so focused on moving fast and breaking things and you have
no idea how much those things cost if they break. And funny enough, to your point, I
did a LinkedIn post last year when my stuff was stolen in Madrid. I was homeless for two
days, lost everything, laptop, phone, wallet, everything, get home and somebody was like,
well, did you file a claim with your renters insurance? I was like, why would my renters
insurance? Wait, what? It didn't, it turns out, right? Renders insurance like ended up
covering so much of it. And I didn't even think that it would cover something like that.
And it made this horrible thing in my life actually end up being kind of like, it was
wildly, wildly helpful. So I tell people sometimes like a failure of conditioning to do good
worst case scenario planning. And that's why a lot of us don't appreciate insurance until
sadly we need it. And if you're lucky you have it and you file a claim and if you're
not lucky, you kick yourself in the butt for not having it.
And I think this is especially true in this industry. I think one of the challenges is
the lack of understanding about how valuable insurance is. So speaking specifically to digital
assets back in like 2017, 2018, like one of the first claims we saw come in, which no
one else at the time knew about were these SEC investigations into the crypto exchanges,
which did start way back in 2016, 2017. And the founders of these exchanges at the time
were so new to this space and they never expected to kind of find themselves in the crosshairs
of the SEC. And then you fast forward to today where you see enforcement proceedings come
out of those investigations that have been going on for years. And so insurance really
is for that rainy day where something really bad happens. You never think it's going to
happen to you. Unfortunately, it kind of always does in business at some point, something's
going to hit and that's what insurance is for. But there are other amazing reasons why you
buy insurance too. Like if you want to bring on experienced officers or directors to help
run a company, chances are they know about insurance because insurance for them is a
form of personal asset protection. So if they get sued, they're not going to want to pay
their lawyers. They're going to want either their company to pay or insurance to pay.
So that's another great thing that insurance does. And then it's also, I mean, the products
themselves are great, but it's also in this space especially, it's become a form of like
third party validation. So you take a custodian, for example, they go through this extensive
underwriting process, they come out of it with insurance coverage that they can market
and tell their customers they have. And if they've gone through this extensive vetting
process and now been vetted by yet another third party, that kind of makes everybody
more comfortable about. So insurance does so many things and serves so many purposes.
I've told so many people, I'm like, just have a call with Sarah and just like, just tell
her what you do because I remember that conversation where we had like, where at the very beginning
I was lucky to have an amazing board. And one of them said, so we have DNO insurance,
directors and office insurance. And I was like, I'm sorry, what? And then, of course,
quickly we got that. And then I remember talking with you where we were like way into the process
and you were like, well, who do you have your general liability policy with? And I was like,
general liability. And she's like, don't you say you put on events around the world in
spaces where people could slip and fall or choke on crudité. And I'm like, I never thought
that it's just the things that you don't think about. Right. And look, I'm a lawyer running
an association. What do I know about all of these things? And people are like, well, don't
lawyers know everything? I'm like, lawyers are the worst, trust me, the worst. But it
is just interesting that, and this is where I go back to the conversations with my mom.
It's a thought process, right? Like lawyers are taught to think a certain way, but nobody
I've ever met does worst case scenario planning and hypothesizing like risk managers and insurance
people. And it's a magical thing when you can have that conversation. They see things
that should be obvious to you. But there's a lot of people who came into financial services
or DeFi or CFI and thought that that five part wouldn't be any trouble. And the most
heavily regulated industry in the world would like not need any insurance protection. And
Sarah, to your point, I'm sitting here thinking some guy opened an exchange and didn't think
he needed to insure against the agencies that might come after him like seriously. But that's
my lawyer hat saying that seems like obvious risk, but we just don't see what we don't
see, right? And you guys somehow are like, Oh, I see it all. I see risk and yeah, I
could go down that rabbit hole for hours. But yeah, every news story I look at and I
want kind of product line with an insurance to this day. What insurance policies could
it trigger? And now that you say that, I'm like, wow, that would probably pretty bit
nerdy because that is like what I think about it. I think that translates for nearly every
profession is that it teaches you how to think and see tend to see things through that lens.
And so I find that the more people I can talk to with different lenses helps me see so many
different aspects and facets of a thing that it's just exponentially more helpful, which
is why I was so excited to meet Sarah because I was like, Sarah, save me for myself. I'm
pretty sure that there are things I'm not seeing. And I refuse to ask my mother because
I don't want to have another conversation with my mom where she's like another aspect
of your life where you did not do sufficient risk management. Exhibit A, leaving your things
in a club in Spain. But this kind of leads into like a really good discussion of like
the mechanics of how this works in the sense that, you know, Sarah, you mentioned your broker
and, you know, carry your insurer. And I think people don't realize like the many layers, the
truffle like or no, parfait nature, if you will, or onion like layers, how things with layers
that you guys have, like I don't like the process I think is a little opaque to some people.
So break it down like how does buying a pot like what is the process? I mean, I know that's
sometimes covered in entire books and entire courses. But if there's a TLDR version of like
how does buying a policy work, like hit us. Yeah, we can totally make this easy. The process
really is pretty straightforward. You come to an insurance broker, all US insurers, or most of them
can't deal directly with a company. They have to, the company would have to go through a broker.
So you come to a broker, depending on who your broker is, like we spend a lot of time asking
you questions about your business and really trying to help you understand where your risk
exposures are because a lot of companies think they know, but then they are missing something.
And so that's a process just kind of talking through what your exposures might be, what your
priorities are. Do you want to save money? Do you want broader coverage? What it is that is kind
of top of mind for you? And then we talk about the different insurance products that are out there.
If something's not out there that fits your needs, we create something like leave it or not.
Insurance is a creative space. And then depending on what type of insurance is, either you just
compete in application and the broker submits it to the insurance markets, it's as easy as that.
You turn around a quote, or if it's a little more complicated, like drivers and officers,
liability insurance, cyber insurance, we would still submit an application or some relevant
information. And then you might get on a call with the insurance markets and tell your story
about your company, answer questions. We as a broker totally track you for those who are right
by your side. No uncomfortable question is ever asked. And then you get a quote, and then you
decide what you want to buy. So it's really not a complicated process. So proof would work with
Sarah, would locked in and sit with the insured through those calls. And if it is that Sarah said
it's a complicated company or complicated like cyber, then proof is going to come up with a list
of questions on top of what the application questions are. And sometimes it might take
us a little bit of back and forth. There's sometimes those questions to be easily answered just
on the call. Yeah, there's a little bit of more due diligence on the underwriting side,
if it is more complex. And you guys mentioned like you kind of sit with these companies,
but what types of companies are you working with? Like, I mean, I know I read off just a laundry
list. Maybe it's more helpful to say what companies do you not work with because it felt like everything
was on the list for locked in. But like, is it literally the realm of any type of company?
And for proof, there's nothing that's on target companies like token issuers,
software infrastructure, asset managers, miners, validators, some non-tech service
providers, custodians, payment providers. So I mean, the list can keep going on. I don't think
there's any necessarily red, red flag company. We would like to look at everything, but there
are some where we think it might be too risky to take off. Wait, wait, who are those? Don't make
a cray answer. Who are the two risky? Oh, and now we move into the spicy part of the episode.
Sarah, standpoints, don't take any anybody, right? Well, we still have a reputation
tip or type, but we will work with any type of company. Like in addition to everything that
was on that laundry list, and I apologize because I did not realize how long that list was.
If we work with protocols, we work with DAOs, like the more complicated or newer type of
risks that are out there, well, really, from our perspective, we love learning. And we love kind of
like taking this crypto language and converting it to plain English when we go back to the
insurance market. So even what is newer, like a DAO, we can kind of present it in a way that
isn't so new and scary to companies like proof. Well, and I assume it's kind of like crypto
as a whole in the sense of there was always going to be some matter of amount of risk with everything.
And if you have somebody to educate you through the process, right? If we had more consumer
education, the risk wouldn't be as bad. It's just without somebody to kind of educate you and walk
you through that process, risk takes on an exponentially greater threat than if you have
somebody who's giving you almost like informed consent or information on how to handle the
risk. Like you can make an educated decision about how you handle your risk if you're educated
in how it works, which to me, I think has always been the broker role. I don't know if you see it
that way, but it always felt like somebody that kind of walks you through the... I'm not necessarily
here to tell you proof like company A versus company B. I'm here to tell you like benefits of A,
downsides of pros and cons of A, pros and cons of B. Here you can make an educated decision based
on the facts, right? And I think that's the great thing about a broker and that's what crypto needs
a little bit more of. So it's why I'm excited when we can get in front of the crypto industry
people who help educate make those informed decisions. And on the insurance company side,
it's super helpful that proof has an in-house expertise and are able to leverage that.
The expertise at Ninding and Stone Ridge to make more comfort level, to make us have a more
concrete level with crypto companies, I think for a while, traditional insurance carriers
kind of stayed away from crypto because they just didn't know enough about it. So proof single is
really we know a ton about it, we know how to assess the risk. And also now we're starting to
look at other areas like AI and robotics where some insurance companies might not want to put
the extra effort into learn a ton about it. So they might be staying away from it, but we think we
have a leg up on really doing some additional research to be able to provide capacity and
provide insurance policies within those different areas. Yeah. And I was just going to say, I agree,
Amanda, I think it is a brokerage responsibility to kind of educate the market. And there's a
handful of us, I don't even think it's more than a handful of us who are like, who are true crypto
insurance brokers who have been doing this for a long time. And we've always seen it as our
responsibility to be part of that education process and to facilitate it. Like I know that we have
had huge meetings where you invite all the carriers to come in and you invite either clients or
lawyers, regulators just kind of give their viewpoint on things just because the education
piece really is so important. Now the education piece works two ways. It is a large part of it
is educating the insurance markets, helping distinguish client from client. But it also
works on the part of us as brokers educating our clients as to what each type of insurance does,
what each carrier specializes in, who pays claims, who doesn't. It's the education process works
four ways. That's a perfect lead in to what I was thinking in my head, which is like,
so what do you tell if a company comes in, what do you tell them about why and when should you
buy insurance? What is the discussion? How do you help them kind of broaden the aperture of
seeing their risk of when insurance needs to be there? So as a broker, I mean, honestly, we have
that anytime a company calls to have that conversation, we're ready. We work with startups
all the way to the exchanges here, been around forever now, kind of where the old school players
in the space. And they all need insurance. Even a company that just started some, for startups,
obviously cost tends to be a priority in such a different conversation. The business coverages
like general liability insurance, those are the really important ones for startups. And then as
they grow, we want them to be prepared to understand when D&O should be on the radar, when cyber should
be on the radar. And Kara can speak to this, but quite frankly, when it comes to cyber insurance,
a lot of startups, their cyber hygiene is not quite where it needs to be yet, but they grow into it.
And with the help of a broker and with the help of a market like proof, we all give feedback as to
what proper cyber hygiene should look like or proper D&O governance should look like so that when
a company decides that they want to spend the money on protecting their balance sheet, they know
what they need to do and they can work towards already having everything in place. And it really,
the feedback has been amazing. Like, I truly appreciate what the information they learn from
dealing with the insurance markets and a lot have incorporated that feedback into their daily
operations. And sometimes they need to buy from a contractual standpoint as well in order to work
with some partners, especially for cyber and then errors and emissions policies often they need a
certain amount of coverage in order for another company to feel comfortable working with them.
And I think the cyber side, definitely some of the startups sometimes need a little bit of help.
But I feel like they're better than startups that are not within the digital office space because
you tend to have very tech savvy people at these companies that have a technology background. So
I would say some of the crypto companies are more secure and more knowledgeable around cyber than
what you would see outside of that space because you do tend to have just more tech savvy people
there. Well, and I would assume now, right? Post hacks and all of that. I mean, we've had some really
bad lessons that hopefully people have learned from and don't want to be the next version of.
So that's encouraging to hear that's going in that direction. And, Kara, you mentioned,
actually both of you have mentioned a couple of terms and we don't want to assume that
everybody who's listening to this had parents that got into insurance. So you mentioned directors
and officers or DNO. I think you mentioned ENO, like errors and emissions and cyber.
Just real quickly, what are we talking about? What are those? What's covered when we're
layman's terms of each of those policies? Sure. So for cyber, you hear ransomware a lot in the news.
Ransomware attacks will be covered to the extortion piece. Whatever the cyber attacker is
demanding, that could be covered, the actual ransom. And then if there's business interruption
that's caused by this, the business corruption can be covered. If there's data that's exfiltrated,
the whole process of figuring out what data was exfiltrated, do I need to notify? Who do I need
to notify? How do I get the data back so that a recovery often times finds and penalties. So
there's a lot of different regulations around privacy in the states and outside the states.
You can actually have coverage for that within a cyber policy. There's any sort of third party
litigation coming in from network security or privacy issues that can be covered as well.
And then media as well. So there's a lot and there's even more coverage just than that. Cyber's
a weird one where there's no standard policy form and depends on where the market cycle is,
but there can be a ton of different add-ons to a cyber policy. And then on the DNO side,
we talked about this a little bit before, but if you're a director and officer joining a company,
you want to make sure you're protected because your personal assets could be in stake. So it's
covering a number of things. So it'll cover the reimbursements of a company's indemnification
obligations that it actually covers the indemnification for the company itself. And
which so those two, there's like, because a little bit complicated, most nods like side A,
B, and C, but two of them are more like balance sheet protection and the other ones really to
protect the personal assets of the director and officer. Like if a company really screws up,
just making sure that the directors and officers aren't personally liable for the screw ups.
Correct. Because that's how I always thought of it. Yeah, you don't want to join a company and
then something happens and your actual personal assets are at stake. So a lot of times you require
as a director and officer that that company has an insurance policy in place. That makes sense.
And then they are mission-sized more, it depends on if it's technology errors and missions,
or some sort of professional like, like lawyers will have a lawyers professional liability policy.
And that's really to make sure there's any sort of error mission that you did, that it can be
ended up being covered by a policy. So for tech, you know, technology errors and emissions, like
coding error or a software bug or project delay and breach of any sort of breach of contract is
really what's getting covered there. And for tech, you know, you can also sometimes see that paired
with cyber insurance as well. So they sometimes go hand in hand. I don't think businesses sometimes
realize how expensive lawyers are that even if they did something right, and I've seen this in so
many contexts, and it's actually kind of sad sometimes, where even if they did something right,
and somebody comes along and claims they did it wrong and sues them, once you're the defendant in
a case, like in a posture like that, the expenses go like a hockey stick. And all of a sudden you're
defending possibly completely bogus, horrible claims, and you're paying for an attorney and you're
the feeling of injustice at that, that you're having to pay for an attorney when you could be
100% in the right, doesn't matter. They found some lawyer to bring a completely BS case, right?
I've seen it sadly a number of times. And if you don't have insurance to cover that, the odds that
you might have, especially as a startup, a sufficient litigation defense fund built up,
like people just don't think about how you could do everything right. And some litigious prick
could like put your entire empire at risk. Do you know what I mean? It's horrifying. So yeah,
a clean test, have litigation funding, which we could go to like a whole separate podcast.
Oh gosh, yeah. That could be. And you're starting to see a nuclear verdict. They're seeing
some of these claims being settled for crazy high amounts as well. Well, and that's the thing. I mean,
you're talking, some of those might be legitimate. I'm talking about, I mean, I see it more kind of,
like you see it unfortunately a lot in the sexual harassment space, employment litigation,
just like shakedown lawyers that literally even before a lawsuits filed are out there making
allegations, lawsuits filed, go on a podcast and basically defame people. I mean, you see horrible
stuff to just shakedown people because your average person or your average small company
does not prepare for the day that doing everything right, they still might have to defend because
there's this perception that there's some kind of barrier to plaintiffs lit against, that some
lawyer is going to say, well, no, you're not right. Like, you're actually wrong. You have no,
you should not be allowed to bring this in court. Nope. There's some bottom feeder out there who
will take that case and sue that poor individual or company and then they don't have insurance.
And it's heartbreaking. It's heartbreaking. Yeah, we actually just had a client who just was dismissed
from a lawsuit and a number of, it's a startup. They've been around maybe for two or three years.
There's a number of similarly situated companies that are all named as defendants. All they did
was invest in this one specific company and that's why they were sued. But they, I mean,
they've all incurred a couple of million dollars in defense costs, even for having done nothing and
the court came to the right decision and they were dismissed, but after incurring a couple
million dollars in defense costs and that's just crazy. And if they didn't have insurance in place
for a new company that really does, that kind of could put the end to that company. So, and I just,
I would be remiss if we didn't also mention crime insurance and custody insurance. Custody
insurance is also known as species insurance and both really ensure against the loss of assets
from different events, but ultimately they ensure against the loss of assets. So, you'll see custodians
or exchanges advertise that they have, you know, 50 million, 300 million, 800 million dollars of
insurance and that tends to be that type of loss of asset coverage. So, if there's a hack, if there's,
if you have, you know, a thumb drive stored somewhere and if someone steals it, that's where
that insurance kicks in. I am so glad you explained that because I'm not going to lie. The first time
you said species insurance to me, I thought it was like, oh, like if you discover a new one and
somebody steals it and like claims it from you and then you don't get to name the new species. And
I'm like, this actually makes so much more sense from an insurance perspective. So, these are the
things where I'm like, I'm glad because I would have said, it can't be what I think species insurance
is, right? So, that's awesome. And I appreciate when you guys explain terms that I think I know
but I'm wildly off and wrong. So, if we start to use something and you're like, oh, have we defined
that? We try to go back. So, I'm glad you caught that. Although we could probably create like a
copyright intellectual property product for a new species if you want to, man, I can work with you.
That has to be out there, I think. But I'm that idiot that like when I'm traveling and I see a
bird or something, I'm like, has somebody seen that before? Could that be a new species? And I'm
like, the odds that you're going to see a new species of anything. But these are just the stupid
things that I think about that. But somebody might have created actual species insurance. You're
right. I'm like, and if it doesn't exist, maybe it does or should. But yeah, these are the nerdy
thoughts that I have. So, Cara and I can geek out on like, what are the insurances that don't exist
that should exist? And I see how insurance can be wildly creative now that we're going down that
hilarious rabbit hole. But a couple minutes ago, Cara, you were talking about like some of the
advantages working with digital asset companies in terms of their tech savviness. But Sarah,
I'm curious, like being in the weeds, are there challenges you face? Like, are there difficulties
with digital asset companies? Or are they all just magical, wonderful, like super tech people?
I mean, I'd love to think they're all just magical and magical. Magical unicorns.
Totally. In my experience, that's what they are. But yeah, no, I mean, they're, well, we already
touched on one of the challenges, like the lack of education. So companies in the space really
not understanding why insurance is so valuable. So that's a lack of knowledge is one challenge.
But I would say across the board, the biggest challenge is actually our regulatory environment
here in the States. Just the uncertainty is terrifying to the insurance markets. Like,
insurance markets, for the most part, tend to be very traditional companies and everything they do
is based off of data. And the SEC being so aggressive and coming out of nowhere with some of their
positions, it is alarming to the insurance markets who kind of are, you know, potentially stuck on
the other side picking up the cost of defending an SEC enforcement proceeding. And so I think the
lack of regulatory certainty right now is the biggest challenge for the industry, from the
insurance perspective. So not to go like full geek, but I saw along came Polly, right? And I don't
know if you ever saw that movie. Karen knows exactly. I feel like every insurance person I know
has seen this movie because it's a rom-com about an actuary. And they actually managed to make
like actuarial jobs like sexy and funny, only I think, what is it, Ben Stiller, I think can do that.
But there is something he talks about where it's like, in order to underwrite, like in order to
ensure against the worst case scenario, you actually have to do so much research and analysis on
lots of data points to know over time, right, that this loss, this loss, this loss, it's going
to be about these amounts or this activity, this activity, this activity is going to incur this
much risk of enforcement. And to your point, like when that's hard to predict, that's like an
actuary's worst nightmare because that means that math may not add up and we may ensure you and then
all of a sudden there's some giant claim for activity that otherwise we would have thought
was okay under this regulatory framework. But holy crap, like who brings an enforcement action on
this, right? And so I think in my mind, and I don't know if this is right. So correct me,
that's the underwriting process, right? Is doing analyzing that risk and then trying to figure
out and maybe like, Kara, is that how underwriting works? Like what do you look at when you're
underwriting, especially like for like crypto specific companies? Sure. So the underwriters
typically work with the actuaries and the actuaries you're looking at to your point of
asset of data points, there's not as many within the crypto space just to see what it hasn't been
around long enough, but it's easy enough to compare different crypto companies with what the
traditional company would be. So if it's a tech crypto company, then you can just compare it with
a normal tech company and we'll get the law of history there. But to Sarah's point around
regulation, sometimes when things like that happen, you might have to do like an asset analysis as
if this regulation was at place before, as if it wasn't, and COVID just totally, I mean, a lot of
people weren't aware how much the courts were backlogged with these cases. So just seeing
like there weren't a ton of claims coming up in reality, there were, but they were just backlogged
because of COVID. So there's a lot of different things you need to think about. And that's my
really like insurance is you like to keep up with what's going on in the world regardless of what
insurance pipeline there is. And if you think about, there's also like catastrophe models. So
there's actual reason you can also have a cat model or role, which is not like a cat, like a
kitty cat walking down like the wrong thing. You knew where I was going to ask. I love that you
knew I was going to say that. I knew where you're going to sound like. I think I can't walk that,
but it's a somebody that looks at what's the worst case scenario, right? And for properties, a lot
easier because you can look at how many hurricanes have happened, but through cyber where there are
cyber catastrophe models, but it's a lot more difficult because there hasn't been really like
a massive cyber hurricane on that has caused a big loss at least to the intern industry. So it's
very hard from an actuarial standpoint to price this and saying theater, comparing it with any
other product line with a crypto is definitely I think the pricing becomes a challenge because
there just hasn't been a lot of history. But from an underrated perspective, we'd be looking at
what's the nature of the business or they confine with various regulations that are out there,
early financially sound, what's the experience of the management, what's their past claims history,
how seriously are they taking KYC and AML, what client for crypto is it, custody is an exchange,
is it decentralized, can you transfer virtual assets, who are their clients being served?
On the cyber standpoint, what exactly are they doing, how many records are they holding,
what kinds of records are they? Healthcare information, is it just regular credit card
information? And what are they working with the customer? So there's a lot there to unpack when
you're analyzing the different policies. It feels like everything you just said is triggering a memory
of something my mom said, is that creating a risk profile? All those questions? Essentially,
yes, it will work with Sarah and we'll get the application that the insurer built out with
Blue Star as assistants and we'll be able to analyze and then ask further questions. But
we end up coming up with an underwriting rationale as to why do we think this is a good risk and why
do we think the premium charge makes sense? And it is essentially to your point,
creating a risk profile. So I get along with Paulie and be like, Ben Stiller comparing,
I guess, was it his ex-wife or a sconce with Jennifer Aniston? Oh, I was thinking it was the
moment when he refuses to touch bar nuts, like his feeling about where he's like, you have no idea
how many hands do you have any idea the risk profile of bar nuts? And I don't think that was
exactly the line, but I've never been able to touch bar nuts ever since that movie and it is
wild. But I guess as I was sitting here thinking, obviously, my background was more in the law
enforcement and AMLC of T-Space. And so when we think of the risk profile from a financial
institution perspective, there are things that you can do. There's actually an entire industry
around improving or getting your risk profile right, like balancing how much risk you're taking in
and the AMLC of T program that you're putting in place in terms of how much compliance you need
for that risk. And I'm curious, does that translate in terms of are there things that insurers can do
to improve their risk profile or things that they it's like, where, okay, you're taking in this much
risk, you can have X amount of insurance, but you need to kind of balance those things out.
Does it work the same way? Yes, definitely. We make sure we're underwriting to that.
Roeby has there been any audits done? If you go back, my background is very much in cyber,
going back for a while. So are they doing backups? Are they doing caching? Are they doing employee
training? Are they doing MSA? Are they managing their vendors? Do they have network segmentation?
Do they have a privacy policy in place? Do they have a disaster recovery policy in place? And if
they don't have those things, it's okay. We can work with them to help them get them. So whether
Proof is working with vendors or Sarah can work with us to make sure that we're making them a
better cyber risk hygiene profile that makes the insurance here is more comfortable and willing to
work with that company. And it's the same thing looking at pretty much any insurance product line.
There's definitely some things we can do to help them ensure become a better risk.
And Sarah, I'm assuming maybe it does the broker play a role in that at all? Or
like, are you in that process? Yeah, 100%. I would like to think that we kind of take care of it
before we get to the proof or another market stage. Like we do work with a number of third parties,
especially when it comes to cyber. And we can run a bunch of our own analytic tools and stuff
to check a cyber hygiene for our clients. But even outside of cyber, a lot of times we talk about
pen testing and whether our clients have had that done, depending on what type of company they are.
From a D&O perspective, again, depending on the type of company, like how do they store their
customer assets versus their own company assets? Do they have reserves in place? Like there's a lot
that goes into preparing a client and making sure they're ready to go to the market. And we
definitely help. Is it like cleaning up a house? Like cleaning up a house and staging it a little
bit before you bring the realtor in to get your kind of like market, you know, assessment where
it's like, don't leave crap all over the floor because filthy houses get lower prices kind of
thing. Well, right. And you only get like to make one first impression. So as your broker,
we want it to be the best impression possible. That it's funny. I was thinking that as you
were saying it, I was like, I remember when I didn't clean before a realtor came over and she
was like, oh, so you're going to be that client. And I was like, I'm so sorry. I just didn't think
about it. But you're right. You really do only get one chance to make a first impression. And I,
people say that, but I think it like plays out for absolutely everything. And I think one of you
touched on this earlier, Sarah, I think it was you when you were talking about the SEC enforcement
actions. But I'm curious, like, does interest from like digital asset companies in buying
insurance, does it do market events like have impacts on that? Does it vary or like,
how do they even take into account market events? Yeah. So it's funny because like, I feel like
there should be a straightforward answer to that question. And I'm not sure there is like after
the bankruptcies and FTX happened towards the end of 2022, like we were really concerned that
carriers were going to pull out of the market, that we were going to see maybe less companies
wanting to spend money. But it was the exact opposite. We saw a huge influx of companies wanting
to buy insurance. So I think, or even, you know, using the upcoming having as an example, like we
expect to see more miners looking for insurance because the having will have an effect on their
balance sheet. And so I think as market events happen, I hope we continue to educate the digital
asset ecosystem about the value of insurance. And then, you know, as potentially negative
events happen, hopefully we see more and more companies coming to us to buy insurance because
they understand there's a little bit more urgency when an event might have a negative outcome on
pieces of the parts of the industry. But, you know, overall, like from the broker perspective,
since probably 2018 or 2019, there's been like a steady influx of companies in the space looking
for insurance, which is a really nice thing to see because we know the value of what it does. And I
think companies are really starting to understand more about why it is important.
Yeah, I will say, and I had this conversation recently in Australia because they have an
amazing Australian DeFi Association there. And there's all kinds of just amazing startup
founders who come. And we were talking about if we could just get a few more crypto lawyers and
crypto insurance people in front of these folks early on, because I feel like that's the time
where they're sitting in their mom's basement. And they really don't understand that during that,
you know, family, family and friends fundraising, the best thing that they could do for themselves
immediately is to actually just ensure and protect themselves. Like it should almost just be like a
prerequisite. And maybe some folks Google and it says somewhere a startup, you know, the first thing
you should do is get insurance. But when I think of how long it took us to get general liability
insurance, just because we were moving so fast, we were doing events, we were doing all the things,
things are going so well, I'm a freaking lawyer, I should know this. And then all of a sudden one day,
four, six months goes by and you're like, holy guacamole, Batman, how have we not had this in
place? And it's not that they don't know, it's just that there's you're so intent on building
something. And especially when it's going well, that you're almost at more risk, because it's so
easy to focus on the things going well that your mindset is not all the things that could go wrong.
And so I think, you know, if I could get if there's a startup founder, if there's somebody out there
listening to this, if I could if I could beg one thing, it's whatever money you have, that you
think you don't have like call a broker, like if you're running a company and you don't have
insurance, you might not even have the insurance that you need. But if you haven't talked to an
insurance broker for the love of God, please call an insurance broker. Like that for me is the takeaway
of the podcast. Call Sarah, call Sarah, trust me, she will tell you all the ways in which you have
missed gaps in your life. And she made me feel so much better about it too. She was so nice. She's
like, you're not an idiot, you're not a bad lawyer, like we can fix this, this is fixable.
And it's such like an interesting cycle too, because the startups, first of all, when you're a
startup, you could probably get insurance for a lot less money, because there's a lot less to insurer.
But also like start building those insurance carrier partners then when everything is perfect
and great, because fast forward five, 10 years when you're bound to have that claim, then you
already have that deep partnership with a number of insurance carriers. So, you know, they're less
likely to raise your insurance premiums and things like that, because they already know you and know
how good you've been to work with. So, like the sooner you start to get to know the insurance
carriers and put it within the better it is in the long run. Okay. So now that we have made it
clear how sexy and exciting insurance is, the question that is on everybody's mind that is
listening to this right now, I'm sure is, how do I get a career in the sexy insurance industry
and what types of careers are there? So, I mean, we've covered obviously like broker, right? And
Cara, what's your official like you're not an would you be an underwriter or you an insurer?
Underwriter. Yep. Underwriter. Yes. So, usually the underwriters are working for the insurance
companies or the insurers. We've talked a little bit about actuaries already, catastrophe models,
so cat modelers, then a lot can I mean, actually, you're gonna more of a mathematical or
actuary background. Usually, cat modelers will have actual or math background as well. And then
there's a lot of legal backgrounds like on the claim side and contract wording. So, there's a
lot of opportunities for a lot of people, product development, there's a lot. There's a ton of
different roles within insurance. So, I think it could really, if someone's interested in it,
there's a role for them in different areas. Well, I think, Sarah, I love that you touched on this,
you know, because Cara is talking about things as if, you know, like, well, you need to have this
background, but you didn't have a background insurance per se, you were a lawyer, and then
you kind of moved over into like the insurance side. So, it's clear that people can get into it
later if they're, I mean, obviously, the legal part was probably super relevant to it. But I'm
curious, like, have you guys seen people make the switch having had like a previous career?
Yeah, previous careers are just majors in history. It doesn't really matter what your major is, it
can still apply from an insurance perspective. And it really is, it's been a great career. I mean,
there's opportunities for travel, you're helping people with a very charitable industry. And
it's very collegial too, there's a lot of networking going on and people, I mean,
I married someone in insurance or our dinner conversations are not very exciting, but a lot
of my friends are in insurance. And it is not true. I can tell you as a kid that sat at that table
listening to insurance conversations, your children will be better off for it. Trust me. I was explaining
long term care insurance to friends in college when they were like, what are you talking about
right now? So trust me, you are setting them up for success to have the insurance discussions in
front of your children as early as humanly possible. And I also love that you mentioned the travel
opportunities without mic dropping where you're sitting and recording this from right now. You're
in Bermuda, aren't you? I'm definitely in Bermuda and I can see the ocean right now. So it's some
good views. So every aspect of insurance is sexy. Travel meeting a life partner, like you've covered
all the insurance can get you everything you want in life, essentially. But I would be remiss as the
Association for Women in Crypto if we didn't talk about kind of the elephant in the insurance room,
if you will. You know, my mom used to talk about this all the time when she would go to risk management
conferences that she was often like the only woman in a room of like two or 300 men. Now,
this was obviously in like the 70s and fingers crossed different times. But is it or is it a
still pretty male dominated industry? And hopefully times have changed. I'm crossing my fingers. You
can't see it. Well, you can see it. But hopefully times have changed. I would say still male dominated,
but it's getting way better. I mean, especially male dominated when you look at the managerial side,
but I do like with the last I've been in the industry 20 years and the last 20 years it's gotten
significantly better. And I was probably a unique one because I started in reinsurance and within
directors and officers space, which was very, very heavily male dominated. But now that I look around
the room, there's a lot more women, especially in exciting things like cyber or digital assets. I
think women are the one of the first ones to raise their hand and say, Hey, like I all learn more on
that. And I think this is going to be a big opportunity. And I think there's a lot more
concentration at diversity in general within the interest industry. So it's gotten like a lot,
a lot better. But there's still work to do for sure. But there's a lot of different industry
groups out there. So I think in my intro, you had mentioned I'm on the board of AVIW, which has been
around since the 70s. So that's the Association of Professional Insurance Women. And now I'm learning
maybe your mom was in it at one point or maybe she's in it right now. I'm literally going to call her
and ask her as soon as we hang up. I'm going to be like, tell me you've been in this thing. And I
had no idea she's in like nearly every other women's association. So that would not surprise me. But
it was literally when I saw it, I was like, I wonder if my mom was in this. But Sarah, have you had
the same experience or hopefully it's gotten better? Yeah, no, I echo everything Kara said. Like it
really has always traditionally been a male dominated industry. But there's still those moments
where and I joke about it with some of my team members all the time, we did these two days of
merkin meetings in New York, and we had coffees and lunches and breakfast and dinners and literally
all cryptocurrency related insurance markets. I was the only woman at every single table we
sat at. And but and it was so but it was actually good because it was so obvious because that is
not normal anymore. Like normally it really is much more mixed. So we're moving in the right
direction, which is really, really exciting because you think about insurance, like it's such an old,
typically traditional, conservative, slow moving industry. And it's really changed so much. And
it's so so I mean, I can't wait to see what the next few years have in store. I think it's just
going to keep evolving and becoming more inclusive. And it'll be to be amazing and just great stuff.
Well, I will say I've gotten to know both of you. Sarah, obviously I knew before, but Kara got to
know you through prepping for this. And you're both such incredibly warm, wonderful women. And I
hope, you know, if you're a woman out there interested in the insurance industry or questions,
you know, I hope you'll follow Sarah and Kara on LinkedIn and reach out and connect with them.
And I'm sure they'd be happy to talk with you about or reach out to me. And I'm happy to get you
in connection with even more women in the insurance industry. But would love to echo what Sarah said.
And especially what Kara said, which is that we see this all the time in crypto blockchain
Web 3, which is actually part of why I created the association is that women are the first to
raise their hands to learn new things, especially in USgov. If you look at who were the leading
kind of like prosecutors, agents, analysts, initially everyone, for some reason, all women
learning this new weird thing. And we just have to be a little bit better about taking that learning
and using it to propel ourselves upward, not just into but upward. And so I'm always really
excited when women like Kara and Sarah have done that process and come and kind of share their
knowledge. Kara, Sarah, I love that your name is Rhyme, but I also love that we were able to have
you guys. I told you when you said, I don't know how we're going to make insurance sexy. I was like,
you don't have to make insurance sexy. I told you this would be a fantastically fun time.
Having learned from somebody who managed to make insurance fascinating and interesting my entire
life, I can't imagine anyone better to have this conversation with. So just want to say thank you
for being here for your wonderful explanations, your patience with me and not knowing what
species your catwalks really were. So this was great. I also want to say a huge thank you to
our sponsor Bracewell LLP to Emily Krabowski for her invaluable technical support, Stephen Sargent
and Airdrop for their assistance with post production and everybody who tunes in and listens.
Positive or negative, we welcome your feedback and we hope you'll rate us online. Please let us
know if you have comments, questions or thoughts for future podcasts. For anyone who's interested
in learning more about the association, our global events or the initiatives we're working on to
increase inclusion, please check out our public LinkedIn page, our Twitter or Instagram pages
at AWIC Global or our webpage at www.womenincrypto.org, which is also where you can sign up and join.
Thanks again for tuning in. We hope you have a wonderful day, a great week and we hope to see you next time.