A Bermudian-based specialty insurance carrier that supports emerging and innovative industries has launched a new product to address the growing risk of crypto exchange defaults.

Relm Insurance said Faltaweb3 is a bespoke risk transfer solution that asset managers, broker/dealers or custodians can purchase to give their customers peace of mind in the event that they are unable to withdraw funds from exchanges owing to an exchange default.

The company said this first-of-its-kind solution provides policyholder protection against such defaults, encompassing “insolvency, liquidation, bankruptcy, or halting of account withdrawals”.

With the frequency of such events increasing in recent years, Relm said it has developed Faltaweb3 to provide commercial customers of exchanges with more confidence to invest and trade.

With more than five years of experience insuring companies across the Web3 ecosystem, Relm said its underwriting team has developed a robust repository of underwriting and risk data specific to digital assets.

For Faltaweb3, Relm said it will harness its proprietary data alongside insights from Agio Ratings, a credit rating firm with an established record of assessing exchange default risk.

It said the rigorous quantitative approach of Agio Ratings flagged high risk at FTX and several other exchanges that subsequently defaulted.

“Exchange risk is notoriously difficult to hedge, even for the most sophisticated risk managers. We’re excited to support Relm’s vision to broaden access to coverage in the event of an exchange default,” said Ana De Sousa, chief executive of Agio Ratings.

Joseph Ziolkowski, the chief executive and founder of Relm, said: “This new solution further solidifies our alignment with innovators in the digital asset space.

“Insurance should be an enabling force for the maturing crypto economy. Faltaweb3 was built from deep industry engagement, ensuring that we meet the unique needs of market participants handling significant volumes of fiat and crypto across exchanges.”

To address this critical exposure with greater flexibility, Relm said it can also leverage its alternative reinsurance infrastructure to enable self-insurance options and the utilisation of third-party capital to underwrite larger limits.

Relm offers a bankruptcy-protected, turnkey captive insurance option for commercial entities reliant on exchanges, allowing them to participate in underwriting profits.

Additionally, Relm said, it can quickly establish reinsurance sidecars, deploying third-party capital — denominated in fiat or digital assets — to create regulated reinsurance capacity absent in the traditional market.

“Through direct engagement with stakeholders and cutting-edge technology partners, Relm continues to redefine the possibilities of risk transfer solutions,” said Claire Davey, Relm’s head of product innovation and emerging risk.

“Faltaweb3 exemplifies our commitment to identifying emerging risks and utilising data-driven insights alongside regulated insurance infrastructure to create products that address gaps in the traditional insurance market and provide confidence to a growing digital asset economy.”