The new Property (Digital Assets etc) Act 2025 (“the Act”) at 42 words (not including standard legislation language) is almost the briefest piece of legislation we’ve ever seen. It’s also deliberately flexible, and quietly radical. 

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It establishes that English law now recognises a third category of property beyond things in possession and things in action. In practice, this gives courts explicit permission to treat a digital asset—whether a token, NFT, or other “controlbased” construct—as property where its characteristics justify it.

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The Act doesn’t define what counts as a digital asset. It doesn’t prescribe valuation rules. And it doesn’t refer anywhere to insurance or insurable interests. But it does remove the single largest legal objection insurers could historically have leaned on, that “Digital assets are not property”.

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There are implications for insurance.  We started to look at this last September, before the Act was finalised, as part of our article “New Frontiers: Insuring the Value of Lost Data”. 

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In this article, we explore more explicitly how the Act has created the clarity that allows us to evolve what has long been the most traditional forms of insurance – loss of, or damage to property – into a modern and innovative product that recognises a whole new customer-driven demand.

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Why This May Become a Growth Area — and Faster Than Expected

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The Act aligns neatly with wider UK policy ambition and is part of the drive to deliver economic growth in the UK, a cornerstone objective of the present government in so far as the role of the financial services sector is concerned. Related activities that are of relevance include:

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• The FCA’s evolving crypto asset regulatory framework;

• The government positioning of the UK as a “digital asset hub”;

• The rise of tokenised real world assets (RWAs);

• Increasing institutional investment in custody, infrastructure, and tokenisation.

 

In short, the environment is being created for a wide range of digital property and assets to be created and the Act has been drafted with intentional flexibility to allow the courts to expand its application. That of course brings complications from the perspective of the insurance contract, with the certainty that comes from the decisions of our Higher Courts contemplated but not yet available.

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This growth in digital asset markets is likely to result in two key outcomes in so far as the demand for insurance is concerned:

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1. More firms handling digital assets, either on balance sheet or in custody; and

2. New exposures emerging, particularly around theft, key loss, inaccessibility, and system failure.

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Insurers respond to the risk their customers are exposed to and we can expect to see firms seeking ways to make their capital work for them in protecting against risks associated with digital environments.

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The UK government has just provided the legal clarity investors and insurers needed and we can be reasonably certain the market will do what it has always done when new opportunities arise and respond accordingly.

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What We Can Say

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At a minimum, the legal hurdle in establishing a digital asset is someone’s property has been swept away and so under the law digital assets can be lost, stolen or destroyed to the detriment of their owner, can be used as security and can form part of someone’s estate in insolvency or death. 

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And they can be insured. Broadly the same perils can be insured against as physical assets – and insurers who pay out will have the same subrogation recovery rights against any third party who may have unlawfully acquired, lost or destroyed them as with any other type of property traditionally insured. 

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What Practical Questions Will The Act Force the Market to Confront?

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Anyone considering covering these perils will still need to answer some important practical questions — which the Act creates but doesn’t answer. It is intentionally vague, because this is a fast-moving arena, but some of the more immediate questions include:

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• What does loss look like when no physical object is lost or taken?
  A lost or stolen private key? A compromised wallet? A protocol breach? Traditional property wordings are very much orientated to the loss of or damage to something tangible when such loss is usually obvious. More widely insurance has generally only encroached into covering intangible “things in possession” when it comes to money held electronically in the form of bank balances or funds. 

• When is a digital asset destroyed?
  When the key is lost? When the blockchain forks? When the custodian collapses?

• How do you prove loss?
  Audit trails may exist, but attribution and causation are rarely straightforward. The principle of Insurable Interest is founded in part on the concept that the value of the property can be established and loss of it has a financial consequence. Might it become difficult in certain circumstances to separate actual value from hypothetical value associated with investment rather than ownership?

• What is the valuation date?
  Highly volatile assets create indemnity tension immediately. When that is combined with the thought that the date of loss may not be immediately obvious, the potential for complications in establishing the date of loss for valuation purposes arises.

 

These aren’t theoretical questions — they are claims questions that go to the heart of an insurance contract and will require careful consideration both from an insurance perspective, but also in all likelihood, from subject-matter experts with a detailed understand of the property asset class. Insurers must have answers to them in the policy wording.

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From my experience of property and crime policies (for example) bright people have devised ways via policy conditions and definitions to resolve questions like these and so I don’t see these questions being insoluble. 

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Some Threshold Insurance Issues

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Focussing a bit more on products and ideas, here are some preliminary thoughts.

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Who Could Be Insured (and Aggregation Exposure)

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The Act is unlikely to affect the question of who “owns” a digital asset. 

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Parties that “handle” digital assets (eg exchanges and custodians) are likely to be a potential point of vulnerability for systemic “loss” of digital assets. A protocol compromise, exchange failure, or coordinated cyber-attack could wipe out eye-watering value. However, these parties are unlikely to “own” the digital assets; they are held on behalf of the owners under a contract or trust: so liability rather than property may be more relevant.

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In terms of ownership, in reality no individual will be able to insure against loss of the wallet or private key held by them for the obvious reason they are far too insecure and therefore too great a risk with the potential loss very significant indeed, unless (potentially) held by an approved custodian with there being strong subrogation rights against the custodian in place. 

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But corporate holders of digital assets and funds who invest in them, whilst still a point of vulnerability, can be more reliably assessed for their risks of an insured peril and insurance arranged. It is likely these entities are significant buyers of property insurance already and so are known quantities.

   

Whilst systemic risk is borderless, instantaneous, and not geographically constrained so potentially frightening, policy language can be used in a similar way as in cyber insurance to reduce the risk of pay-outs in the case of systemic failure or a “cyber operation”.

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Business Interruption (BI) & NonDamage BI (NDBI)

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In property insurance it’s traditional to insure against business interruption (“BI”) as well as property damage, in the same policy. Where there is covered physical damage the knock-on financial effects of that damage are also covered under the BI. So how would BI in the context of loss of a digital asset work?

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Digital property failures could easily cause knock-on effects, for instance preventing access to other property or rendering it commercially useless, or leading to an inability to complete other transactions. In traditional MD/BI policies this kind of business interruption is often covered where linked to material damage so the concept is well established. If access, control, or operability depends on a digital asset, then it’s easy to see that a digital event could cause BI losses.  

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Even before the Act Non-Damage BI cover (where BI is covered with no physical damage) had expanded rapidly in Cyber and MD/BI policies in recent years, so would it not be a relatively simple stretch to provide cover for loss of digital assets and attendant BI (whether classed as BI or NDBI)?  Digital property may be the next frontier. 

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Captives as the First Movers

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Market not keen to provide the cover? As with many emerging, unmodelled exposures, it is very possible that if the insurance market is cautious initially, corporates will transfer early forms of identified risk to captives. Captives can:

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• trial coverage structures;

• gather loss data;

• build pricing curves;

• hedge volatility; and

• prepare for market risk transfer later.

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This mirrors the trajectory of early cyber and transactional liability exposures before insurers got truly comfortable with when and how to offer traditional risk transfer solutions.

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Interplay with Cyber 

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Cyber interacts in a complex way with many other policies and I am not going to get too much into that here you’ll be pleased to know, as this one is pretty easy: cyber policies do not cover loss of assets. 

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Whilst most cyber policies these days do cover BI the trigger is not loss of or damage to property but a “security failure” or perhaps also a “systems failure”.  To the extent one of these failures also involves a theft of assets then all/most consequences of that failure except the loss of the assets themselves, are likely to be covered under cyber, and the loss of the asset itself may be covered under a crime or specie policy (depending on the reason for its loss and the type of asset) or potentially a property policy assuming cyber related loss is not completely excluded. Otherwise, loss of the asset itself is not going to be covered. 

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This potential gap exists whether the asset is physical or digital but it is more likely to exist if it is digital. The Act potentially increases the pressure to address this gap because it strengthens the evidential basis for treating digital asset loss as property loss, not merely economic harm.

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Getting a New Product or Cover Launched

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Many of you will know this can be super hard! Leaving aside product governance and other regulatory considerations, a lack of confidence in the understanding of the underlying risk is a big barrier to entry so building a viable market can be a slow process. New insurance classes bring with them higher degrees of uncertainty, which is a major factor in the way insurers typically get comfortable accepting the transfer of risk for a fixed price (premium). That drives what is usually a fairly predictable pattern to help mitigate exposure as knowledge and insight is developed:

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• Phase 1: hard, narrow, expensive products –cover controlled tightly through definitions and exclusions; strict conditions including warranties and conditions precedent; mid-term obligations (these can be traps for the unwary); scheduled assets; and low limits/high premiums.

• Phase 2: broader, cheaper, more commercially flexible products – once sufficient claims and actuarial data is available to drive confidence and greater levels of statistical certainty and price, the relaxation of many of the above over time. New entrants to the market will accelerate this process.

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We have seen this movie before: cyber, hedge fund fraud, crypto cold storage, IP insurance, representations & warranties.

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I was involved with the development of the early crypto cold-storage policies and they proved a simple point: the market will support cover for digital risk when custody, control, and operational security are understood, at a price, and on strict terms. 

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The Takeaway — Small Act, Big Potential

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The Property (Digital Assets etc) Act 2025 creates a legal foundation on which an entirely new class of property insurance could be built. It has removed one of the traditional barriers to insuring digital assets. Other barriers can be overcome through underwriting expertise, policy language and, over time, through loss experience.

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This could be the beginnings of a new property insurance era — one where assets exist in code, value lives in distributed systems, and loss can be simultaneous, global, and instantaneous.

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The market will need to move carefully. But it will need to move.

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