Metaverse holds opportunity for U.S. insurers but regulatory hurdles lie ahead

NEW YORK(Thomson Reuters Regulatory Intelligence) - Insurers are seeing significant opportunities to offer existing and new products in the “metaverse,” but will have to overcome much regulatory skepticism in a sector rife with privacy and cybersecurity risks.

Small figurines are seen in front of displayed Meta logo in this illustration taken February 11, 2022.

“Metaverse” is a loosely defined term used to describe a digital world utilizing virtual and augmented reality and the internet. The technology typically allows users to create digital versions of themselves and navigate immersive cyberspace experiences that mimic real life. Tech visionaries expect this new dimension of the internet -- or “Web 3.0,” where users own and operate their content -- to be its future, merging the physical and digital worlds to allow people to gather in a virtual location.

Some metaverse platforms -- such as Sandbox, Decentraland and NFT Worlds, among others -- allow users to use cryptocurrency to buy digital clothes and accessories for their virtual personas, or avatars, as well as tickets to virtual events and even “land” that can be used for building, renting or reselling. In lieu of physical tickets or real estate, ownership is secured through non-fungible tokens (NFTs) or non-replicable digital tokens, and the transaction is recorded on blockchain networks.

The purchase, sale or trading of digital property and in-game assets already is ripe for insurers to offer risk coverage. Virtual real estate is on course to pass $1.9 billion in sales in 2022, according to MetaMetriks, a metaverse land analytics provider. Sales could cross $3 billion, driven by the launch of a major metaverse platform “Otherside”, the data provider said.

Companies including HSBC, JPMorgan, Samsung, Adidas and video game maker Atari have invested in securing a presence on the metaverse.

As the adoption of metaverse-based platforms grows, security risks to the digital identities of individuals and corporations are also expected to increase. Insurance industry experts predict a need to protect individuals and property from digital fraud, theft, ransomware, privacy breaches, and business interruption, among other risks.

There may soon be scope to offer insurance coverage for land and property in the metaverse, said Carl Niedbala, co-founder and COO at Founder Shield, an insurance broker. “There will undoubtedly be a big opportunity for cyber insurers to separate from the pack with enhanced coverage and endorsements that contemplate the increased risk that comes with the larger share of an individual’s personal wealth tied to their digital presence,” he added.


The concept of a metaverse or a virtual world entered mainstream discussions after tech giant Facebook threw its weight behind it last October and changed its name to Meta to highlight an expanded focus. Metaverse systems often operate through blockchain, cryptocurrencies and NFTs – all areas that have little to no regulatory oversight.

Experts fear widespread adoption of the metaverse could pose new and poorly understood risks. For instance, it is unclear if an individual user with a weak security protocol could provide an inroad to larger cybercrime operations - a threat that is high on the radar, especially since Russia’s invasion of Ukraine.

Insurers are yet to offer a specific product for the protection of digital property in the metaverse, but are keeping a close eye on its growth and adoption. Insurance technology companies have already built or are in the process of building insurance products for elements of the metaverse such as the crypto wallets often needed to enter metaverse platforms or NFTs that make property ownership possible.

“Our industry will be tasked with creating digital insurance policies that cover non-physical losses from metaverse assets, like cryptocurrencies and NFTs,” said Alex Maffeo, chief executive of digital insurance platform Boost. “There will likely be continuous risks that pop up over time that will require protection,” he added.

Boost has developed a product to provide crypto wallet insurance in association with insurance technology firm Breach Insurance.

Breach is also developing a product that offers insurance coverage for NFTs. “With popularity surrounding the growth of the metaverse, we’re continuously researching and assessing the markets,” Breach’s CEO Eyhab Aejaz said. “We are excited about the space and look forward to seeing how the technology applications mature and the insurable risks that become the biggest areas of need in the space.”

The National Association of Insurance Commissioners, a group of state insurance regulators that analyze new risks and form model laws for states to implement, declined comment on the story.


JPMorgan expects the metaverse to likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion yearly. Citi estimates the metaverse economy could be as large as between $8 trillion and $13 trillion by 2030. If the technology becomes available on mobile phones, the number of users could grow to nearly 5 billion -- or about 60 percent of the United Nations’ estimate of the world’s population at the time.

The metaverse sector is likely to attract greater scrutiny from regulators, policymakers, and governments if expectations of it becoming a new iteration of the internet are realized, Citi analysts said in a note this month. Issues such as anti-money laundering rules, the use of decentralized finance, crypto assets and property rights will all have to be addressed, they said.

“Beyond cybercrimes, which would be an enormous issue (account takeovers, identity theft), we now have the potential for nations to use this platform as a new domain of warfare –cyber, economic, and actual,” said Nazak Nikakhtar, partner at law firm Wiley Rein. “We could also have a whole host of new actors beyond nation-state actors complicating international relations and overall regulation of these platforms.”

Government agencies currently tend to respond to risks after they have emerged, but U.S. regulators now have a chance to assess new complexities and risks and form a framework that would make metaverses safer places, the risk experts said.

For the insurance industry, the metaverse could produce new opportunities to connect with younger customers for existing products and improve the adoption of new products. Studies have shown “Generation Z” and younger millennials, or people born after 1990, are more likely to spend and accumulate wealth in the digital world.

Insurers will also likely face underwriting challenges as new metaverse-related insurance lines would lack comparable models for pricing. Industry experts currently expect to use loss data from cyber insurance to begin underwriting metaverse risk.

There is a tremendous opportunity for insurance innovation, but the metaverse needs to demonstrate more demand for insurance and allow for the technology to become established at scale, said Aejaz. More users would allow the insurance industry to identify insurable risks accurately and model and price the risks accordingly, he added.

(Reporting by Antonita Madonna in New York, Regulatory Intelligence)

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This article was produced by Thomson Reuters Regulatory Intelligence - - and initially posted on April 29. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters