The firm says that the world of cryptocurrencies is growing at a great pace as digitization continues to disrupt the financial services industry.
After doing detailed research of the industry, Old Mutual has made a decision to insure this equipment for cryptocurrency mining due to the unregulated nature of the industry.
Some of the other reasons include that the firm also named cryptocurrencies exposure to fraudulent activity and modified electronic infrastructure of mining equipment which operates on a 24*7 basis, which results in overheating and other malfunctions.
The insurer has started advising its branches not to insure any businesses engaged in crypto-currency mining after extensive industry research and in-depth review of claims from clients which have suffered losses to equipment used for crypto mining.
Old Mutual states that digital currencies are mainly a type of digital asset structured to function as a medium of exchange, which use cryptography to secure financial transactions and handle the formation of additional crypto-currency units formed in the "mining" process.
Christelle Colman, one of the insurance expert at Old Mutual said, "We have chosen not to provide cover for this type of risk as it is quite tricky to conduct a proper risk analysis of an unregulated fledgling industry that is already on the radar of financial authorities due to the unfortunate association with money laundering and cybercrime."
"It is also a highly volatile industry that attracts a lot of speculators so there is no proper risk rating structure in the local market for this type of risk. Even doing a comprehensive inventory of the insured equipment is difficult because the value of the highly modified computer equipment is typically inflated and almost impossible to verify as it is usually imported from obscure suppliers in the Far East."
Old Mutual indicates Crypto mining operations are mainly constructed of heavy application specific integrated circuit devices which are costly and they also increase the load of CPUs and GPUs as they run at 100% Capacity.
It further includes a complication that crypto mining is linked with highly risky trading activities, this simply means that the firms involved in it are likely going to blow out.