Why your D&O may not respond to a digital-asset incident — coverage gap analysis

Directors and officers of digital-asset firms carry exposures the standard D&O wording was not drafted to address. The wording was drafted, mostly, for non-digital-asset firms in a non-digital-asset world. The bolt-ons added in the last three years vary materially between carriers. The practical result, as one underwriter put it in a 2025 conversation: "whether D&O responds to a token event is mostly a question of which carrier wrote your wording, not which director took the action".¹ This primer walks the gaps a buyer should expect to find — and the endorsement language that closes them.

Five exposures D&O may not consistently address

1. Securities-classification disputes. The single largest D&O exposure for digital-asset firms is a regulatory or investor allegation that a token issued by the firm was an unregistered security. The D&O wording's response turns on (a) whether the wording defines "Securities" in a way that captures tokens, (b) whether there is an explicit token exclusion, and (c) whether the relevant regulator's action is within the wording's regulatory-defence language. We see all four permutations on different wordings.

2. Governance and fiduciary-duty challenges. For digital-asset firms with token-holder governance structures (DAO-adjacent governance, on-chain voting, off-chain token-holder rights), an action brought by a token-holder may or may not be treated as a shareholder action by the wording. Where the wording's "Insured Person" and "Securities Claim" definitions do not cleanly capture the action, the cover may be silent and the defence-cost coverage uncertain.

3. Pre-IPO / pre-token-event exposures. A token-generation event (TGE), a public listing, a secondary sale — each is a moment at which directors face a step-change in exposure, and the D&O wording often carries specific carve-outs, sub-limits, or runoff implications for these events. A wording placed three years before the event may not respond to the event without renegotiation.

4. Regulatory-enforcement defence. The wording's regulatory-defence language is the operative clause for any FCA, SEC, MAS, or other regulator interaction. Wordings vary materially on whether defence costs are insured before liability is determined, whether informal regulatory inquiries are in scope, and whether fines and penalties — to the extent insurable by jurisdiction — fall under the wording's "Loss" definition.

5. Side A / DIC for non-indemnifiable losses. Where the corporate vehicle is offshore, the indemnification mechanism may be impaired (sanctions, jurisdictional issues, insolvency). Directors then carry the residual exposure personally, and the Side A / DIC layer becomes the operative protection. Many digital-asset firms operate without a Side A layer, on the assumption that the corporate indemnity is sufficient. It frequently is not.³

The wording walk-through

For each renewal at a digital-asset firm, I walk the wording against the firm's specific exposure inventory before discussing terms with the market. The walk-through follows seven steps.

Step 1 — Insured Person definition. Does the definition capture all directors and officers? Does it capture de facto and shadow directors? For a firm with a foundation structure, does the definition capture foundation council members?

Step 2 — Insured Capacity language. Does the wording respond to actions taken in the Insured Person's professional capacity for the company, including actions taken in respect of token issuance, governance, or regulatory-engagement matters?

Step 3 — Securities / Securities Claim definitions. Does the Securities definition include tokens? If silent, what is the default-position interpretation in the wording's governing-law jurisdiction? Is there a token-classification endorsement available?

Step 4 — Regulatory-defence language. Are FCA / SEC / MAS / other regulators named? Are informal inquiries in scope? What is the defence-cost advancement structure?

Step 5 — Standard exclusions read against the digital-asset exposure inventory. Conduct exclusions; insured-versus-insured; prior-acts; bodily-injury (relevant where digital-asset perils overlap with physical-asset perils for any reason); ERISA-equivalent.

Step 6 — Endorsements. Token-classification, securities-event sub-limit, derivatives sub-limit, Side A / DIC, runoff structure for change-of-control. Each may be negotiable; each adds cost; the question for the buyer is which gap is most exposure-relevant.⁴

Step 7 — Cancellation and renewal language. Carriers retain different rights to cancel or non-renew at renewal; some wordings include a hard non-renewal trigger on certain regulatory events. The buyer should read the trigger before placement.

"The question of whether D&O responds to a token event is mostly a question of which carrier wrote your wording, not which director took the action."

The capacity picture in 2026

D&O capacity for digital-asset firms tightened materially through the 2022-2024 cycle as enforcement activity (notably in the United States) accelerated. Capacity has stabilised at lower absolute limits and at higher pricing than the pre-2022 market, with a smaller number of carriers writing new programmes and a larger number willing to renew incumbents. The London market — including specific Lloyd's syndicates with FI consortium structures, public reporting on which has been ongoing — remains accessible for new programmes at reasonable retention.² The Bermuda market is in scope for excess capacity. The US D&O market remains case-by-case on digital-asset firms.

"Many digital-asset firms operate without a Side A layer, on the assumption that the corporate indemnity is sufficient. It frequently is not."

What a director should ask before signing

Six questions to put to the broker, before renewing or placing a D&O programme at a digital-asset firm:

1. Has the wording been read clause-by-clause against the firm's specific exposure inventory in the last 12 months?
2. Are tokens captured in the Securities definition? If not, is the token-classification endorsement available, and at what cost?
3. Is there a Side A / DIC layer? If not, what is the indemnification structure under the corporate constitution, and is it impaired in any jurisdiction the firm operates in?
4. What is the defence-cost advancement structure?
5. What is the cancellation and non-renewal language?
6. What is the runoff structure on a change-of-control or token-listing event?⁵

A broker who cannot answer all six in writing inside one week is not a broker reading this wording at the depth the wording requires.

A wording market, not a price market

In 2026 D&O for digital-asset firms is a wording market, more than a price market. Two policies at substantially the same premium can respond materially differently to the same incident. The work — the actual work — is reading the difference before the wording is placed, not after the loss arrives. That is what we do on this class. If you want a second reading of an existing wording, the RFI form is the fastest route to a same-business-day acknowledgement.