Insurance for Equity Crowdfunding Investments Brought by AIG
American International Group Inc., better known as AIG, has dipped its toes into the equity crowdfunding market with the introduction of an insurance product aimed to protect investors. The product is known as "Crowdfunding Fidelity," and its designed to protect individual investors against issuer fraud that could occur via theft of issuer assets by those involved with the issuing company. The product is currently available to platforms in Canada and the UK. Eureeca, a Dubai-based crowdfunding platform that is registered in the UK, has already signed on. Chris Thomas, Eureeca's founder and co-CEO, provided some thoughts on his company's decision, via a press release that touted AIG's new product.
There is inherent risk in virtually any investment which range from the size of the small and manageable 'growing pains,' all the way to the other end of the spectrum to the range of 'Houston, we have a problem...' Even the most optimistic investors have a sense of wanting to 'hedge their bets.' But do you need equity crowdfunding insurance? One of the world's largest insurers thinks so, and they have introduced a product that's the first of its kind in the burgeoning crowdfunding space.
"The new power of the crowd and the desire to democratize investing throughout the world can unleash great partnerships. The success of the ecosystem depends on collaboration between all stakeholders. AIG has demonstrated its commitment to being a valued insurer to this new industry by engaging the crowdfunding space at such an early stage." Thomas said. Lex Baugh, AIG's President of Liability and Financial Lines, had this to say, "As a sector still in its infancy, equity crowdfunding platforms are only as strong as the confidence they instill in their investors. This new product will help provide that confidence and help to support this asset class as it matures," Baugh said.
There's a couple of different takeaways on AIG's issuance of a product specific to the equity crowdfunding space. First, for a financial behemoth of the size of AIG to dip its toes into the water, there's a pretty good chance the space will continue on its upward trajectory. Second, while additional protection for investors is a positive step, will the coverage continue to be necessary as the industry matures and regulations are finalized?
We'll have to wait and see how this new product catches on in the UK and Canada, and what that will mean for the rest of the world as regulations continue to be sorted out. In the meantime research and due diligence will be used to reduce risk for those investing through the current equity funding platforms.
Thanks to Eflon for the photo.