Bitcoin in life insurance policies?

The integration of financial products based on digital assets into life insurance policies represents a potential turning point in the financial sector. To date, several options make it possible to envisage the integration of a small share of bitcoins into this star investment of the French (€2,000 billion in outstandings by 2023).

"Insurers are one of the targets we are aiming for with our products," says Marina Beaudean, in charge of France and Benelux for 21Shares, one of the main issuers of ETCs. 

It is no coincidence, moreover, that companies such as 21Shares or CoinShares are harbouring serious hopes of being housed in life insurance policies: insurers are currently refusing to house physical bitcoins in their offerings.

"Insurers will probably take up the subject via repackaged products that will not be based on the pure holding of crypto-assets," warns Arnaud Grünthaler, a partner lawyer at Fieldfisher.  "I think they will turn to financial products that fit into a classic nomenclature compatible with the European MiFID directive," he insists.

"For most investors, the simplest thing is to turn to products created by management companies accredited by the AMF and  accessible in tax wrappers," says Enzo Hallot, head of the investment advisory firm Crypto Patrimoine and a member of the National Association of Financial Advisers (Anacofi). 

The advantage of regulated financial instruments is that they  can be placed in securities accounts. And above all, it is the most common type of investment in life insurance.

To date, a handful of players operating in digital assets meet the European UCITS standard (which provides a framework for UCITS), such as Melanion Capital, whose ETF launched at the end of 2021 comprises shares in companies listed on the US stock exchange and belonging to the bitcoin sector, but also certain funds from asset manager Tobam (BTC-Linked and Blockchain Equity Fun and BITCOIN CO2 Offset Fund).

As Melanion's ETF is not directly composed of digital assets, its performance does not strictly follow the bitcoin price. Nevertheless, as it includes companies such as Microstrategy, Coinbase or mining players (whose stock market dynamics have historically been highly correlated with bitcoin), it has been designed to get as close as possible.

"Sometimes we underperform bitcoin, sometimes we overperform it, but the reality is that we follow it," emphasises Cyril Sabbagh, managing director at Melanion Capital. At the end of 2023, Melanion's ETF had €5 million under management, and this figure is set to rise with the craze triggered by the arrival of a Bitcoin ETF launched by BlackRock in the United States. "When demand arrives, we will have the perfect product to include the bitcoin theme in life insurance or retirement savings plan contracts," insists Cyril Sabbagh.

"This type of offering, like that of Tobam or Melanion, is one of the simplest for institutional investors wishing to gain exposure to Bitcoin within a regulated framework", adds Enzo Hallot.

For those who prefer a vehicle based on a reserve of bitcoins to track the price more closely, they should turn to the ETCs of CoinShares or 21Shares. These are legally debt securities and not co-ownership (like ETFs), but that doesn't make much difference to the investor. 

On the other hand, they do not meet the UCITS standard, which makes it more difficult to place them in life insurance products.

"It is permitted to place SCPIs or structured funds in life insurance policies, so it is possible to put our ETCs as long as the insurer accepts this medium as a unit of account," wants Jérôme Castime, in charge of compliance in France for CoinShares, to believe.

"Even if customers ask their insurer for exposure to crypto-assets, it is very possible that they do not know how to value or manage them," tempers lawyer Arnaud Grünthaler.  "In the longer term, I think that one of the elegant solutions could be to tokenise shares in funds that hold digital assets and offer these regulated security tokens to investors," he concludes.