Specie insurance: A valuable form of coverage
An important but lesser-known niche of the global insurance industry is specie insurance. This specialized form of coverage is essentially about protecting high-value, portable items – such as precious metals, gems, securities, cash and even cryptocurrency. Specie coverage can encompass these items in their many forms, whether they’re stationary or in transit.
Examples of items that can be covered under specie policies include:
Bullion. When people think of bullion, they might envision shiny gold bars in a vault. Bullion technically is a purified form of a precious metal, which can be gold, silver, platinum, palladium or another metal. It is often produced in bars, but bullion also can be in the form of large coins or rounds. With gold, for example, specie insurance can protect this precious metal at all points in its journey: from mined ore to rough form, known as doré bars, to refineries that purify the doré bars according to established standards, to storage in a bullion bank before the bars are transferred to a buyer. A gold bullion bar, typically at least 99% pure and weighing 400 troy ounces -- usually called a 'good delivery bar' – at the current price of gold is worth more than $500,000. For that reason, bullion is usually stored in high-security vaults and transported in armored vehicles.
Diamonds. Nature’s hardest known substance is also one of the world’s most concentrated objects of value. The price per carat of diamonds varies due to size, clarity, color and other factors. A one-carat cut and polished stone, for example, may fetch more than $5,000 per carat, while a two-carat diamond of the same style and quality might be worth four times as much per carat. Larger diamonds are rarer and therefore more valuable. Diamonds and other gems used in jewelry take journeys similar to that of precious metals, and specie insurance can accompany them along the way from mine to cutter, to grader, to jeweler and eventually to the consumer. An important aspect of the global diamond business is the Kimberley Process, which certifies the origin of rough diamonds to prevent trade in conflict diamonds.
Numismatics. This field spans minted coins, paper currency, medals and related objects. Rare coins can be worth millions, such as the 1933 $20 gold coin known as a Double Eagle. Coins and currency are popular among collectors, and various organizations around the world, include the American Numismatic Society, promote the study of numismatics.
Cash in transit. Financial institutions and businesses rely on armored transportation for cash management and to move large quantities of cash and currency. Specie insurance provides protection of cash in transit. Loss frequency is relatively high, depending on location. The Federal Bureau of Investigation classifies cash in transit robbery as a form of cargo theft. In 2016, cargo theft from a vehicle was the most frequent crime of that type in the United States, with more than one incident occurring every day.
In 2016, cargo theft from a vehicle was the most frequent crime of that type in the United States, with more than one incident occurring every day."
Automated teller machines and the cash they contain. Criminals have committed smash-and-grab thefts for a long time. A relatively new twist on this brute-force approach is stealing an entire ATM machine. This type of risk is on the rise as more financial institutions install free-standing ATMs, separate from branches.
Crypto-currencies. In addition to the controlled and monitored currency that is produced by governments, innovative forms of currency are developing. Among these are cryptocurrencies such as Bitcoin. Although digital currencies are produced through mathematical mining, rather than struck from mined metals as physical currencies are, they also are attractive targets for theft. Cryptocurrencies present a new form of risk, and future-focused specie underwriters such as XL Catlin are prepared to provide protection for customers.
For all forms of specie, robbery is one of the principal causes of loss, and sometimes it is perpetrated by or with the assistance of employees. Fidelity and physical damage to are insomnia-inducing risks for the owners and transporters of high-value items. Specie coverage can help them sleep more soundly.
Specie is a competitive line of business, but it requires expertise in underwriting and claim handling. The nature of insuring specie risks means that, when claims occur, they typically are significant. XL Catlin has been writing specie insurance for many years, and we take pride in our expert claims services as well as our knowledgeable, empowered underwriters, who create customized coverage solutions to help our customers grow their businesses.
About the Author
Khem Lewis is an underwriter in XL Catlin’s Fine Art and Specie business, where he has worked since joining the company in 2012. His career experience includes international finance and investment banking. He holds a degree in finance and international business from St. John’s University. He can be reached at firstname.lastname@example.org.