Podcast Title: We Study Billionaires - The Investor’s Podcast Network
Episode: BTC237: Bitcoin & the Insurance Industry w/ Garrett Johnston (Bitcoin Podcast)
Release Date: June 4, 2025
Hosts: Preston Pysh, Garrett Johnston

Episode Summary

In episode BTC237 of Bitcoin Fundamentals, hosted by Preston Pysh, the conversation delves into the intersection of Bitcoin and the insurance industry with expert guest Garrett Johnston. Johnston, a seasoned professional with over 25 years in the insurance sector, brings a profound understanding of how Bitcoin can revolutionize traditional insurance models. This episode explores why Bitcoin is not merely a speculative asset but a pivotal tool for risk management within the insurance landscape.

Guest Introduction

Garrett Johnston begins by outlining his extensive career in insurance, starting as an underwriter and progressing to a leadership role at Marsh, the world's largest insurance broker. With a robust background in both underwriting and corporate strategy, Johnston offers a unique perspective on integrating Bitcoin into insurance practices.

[02:08] Garrett Johnston: "Bitcoin needs all of us with our various backgrounds... to be a bridge builder, a developer."

The Current State of the Insurance Industry

Johnston discusses the traditional reliance of insurance companies on long-dated U.S. Treasuries to manage their "float" — the unearned premiums held to pay future claims. He highlights the risks associated with this strategy, especially in a changing interest rate environment, citing the collapse of Silicon Valley Bank as a cautionary tale.

[05:45] Preston Pysh: "If interest rates are on a trend change, a multi-decade trend change, and you're sitting on long duration debt like you have for 40 years straight... maybe there's an issue and maybe we have to rethink the quote unquote risk of sitting on that type of asset."

Bitcoin as a Risk Management Tool

Johnston argues that Bitcoin can serve as a robust asset for insurers to diversify their investment portfolios, enhance returns, and mitigate risks associated with inflation and social inflation (increasing jury verdicts and claim amounts). He emphasizes that even a small allocation of Bitcoin (2-5%) can significantly improve the solvency and financial health of insurance companies.

[10:17] Garrett Johnston: "When you look at the duration is how do you use it as a risk matrix? At the end of the day, insurance is just a tool, it's not a catch-all solution."

Performance and Comparisons

The discussion includes a comparison of Bitcoin's performance relative to traditional assets like the S&P 500. Johnston references MicroStrategy's strategic Bitcoin investments as a case study, showcasing how allocating Bitcoin to a company's balance sheet can lead to substantial growth without compromising liquidity.

[16:27] Preston Pysh: "2% Bitcoin, 98% cash, and you're in the ballpark of S&P 500 performance over any four-year holding period."

Regulatory Challenges and Solutions

Johnston addresses the current regulatory framework, pointing out that Bitcoin is classified as a non-admitted asset under the NAIC (National Association of Insurance Commissioners) guidelines. He advocates for the inclusion of digital assets like Bitcoin within the admitted assets framework to allow insurers to leverage Bitcoin without facing excessive regulatory hurdles.

[25:21] Garrett Johnston: "If you're an insurance company today holding spot bitcoin, you can technically do it but it's going to be considered a non-admitted asset... economically not viable."

Innovative Uses of Bitcoin in Insurance

The conversation explores innovative applications of Bitcoin in insurance, such as Bitcoin-denominated insurance policies and the use of smart contracts and time locks to enhance security and reduce fraud. Johnston illustrates how these technologies can streamline insurance operations and align asset-liability matching more effectively.

[43:11] Garrett Johnston: "Time locks can slow down the process of a phishing attack or some kind of wrench attack. It eliminates some of the checks and balances."

Case Study: MicroStrategy

Preston highlights MicroStrategy's aggressive Bitcoin strategy, where the company transformed its balance sheet from holding $500 million in liquid assets to $55 billion in Bitcoin over five years. This example underscores the potential for Bitcoin to significantly enhance corporate financial health while maintaining liquidity.

[27:05] Preston Pysh: "They took $500 million and today it's close to $55 billion in five years. And here's the real point... this is all liquid."

Bitcoin Denominated Insurance

Johnston discusses the concept of Bitcoin-denominated insurance, particularly for industries like Bitcoin mining. He explains how such policies can protect against business interruptions without being adversely affected by Bitcoin's volatility, unlike USD-denominated policies.

[34:02] Garrett Johnston: "If you're insuring Bitcoin, a US denominated... when Bitcoin doubles, will your insurance stack just basically be cut in half?"

Regulatory Alignment and Future Outlook

Johnston emphasizes the importance of aligning Bitcoin adoption with regulatory requirements to ensure safety and soundness in the insurance sector. He envisions a future where regulatory bodies incorporate digital assets into their frameworks, paving the way for widespread Bitcoin integration in insurance practices.

[52:49] Garrett Johnston: "We have to start at the regulatory, get the definitions right."

Conclusion and Takeaways

As the episode concludes, both hosts stress the critical need for the insurance industry to consider Bitcoin as a viable asset for enhancing financial stability and managing long-term risks. Johnston encourages insurance professionals to remain curious, engage with the Bitcoin community, and explore innovative strategies to integrate Bitcoin into their financial models.

[57:53] Garrett Johnston: "For the people within insurance, I would just really encourage everybody to be just curious and reach out."

Key Quotes

• Garrett Johnston [02:08]: "Bitcoin needs all of us with our various backgrounds... to be a bridge builder, a developer."
• Preston Pysh [05:45]: "Perhaps there's an issue and maybe we have to rethink the quote unquote risk of sitting on that type of asset."
• Garrett Johnston [10:17]: "When you look at the duration is how do you use it as a risk matrix? At the end of the day, insurance is just a tool, it's not a catch-all solution."
• Preston Pysh [27:05]: "They took $500 million and today it's close to $55 billion in five years. And here's the real point... this is all liquid."
• Garrett Johnston [57:53]: "For the people within insurance, I would just really encourage everybody to be just curious and reach out."

Final Thoughts

This episode of Bitcoin Fundamentals offers a compelling argument for the strategic integration of Bitcoin within the insurance industry. Garrett Johnston's insights highlight how Bitcoin can address longstanding financial challenges in insurance, providing a pathway towards greater financial resilience and efficiency. For insurance professionals and Bitcoin enthusiasts alike, this discussion underscores the transformative potential of Bitcoin in reshaping traditional financial frameworks.

Follow-up Actions:

• Insurance Professionals: Consider exploring Bitcoin as part of your investment portfolio to enhance financial stability and manage long-term risks.
• Bitcoin Enthusiasts: Engage with industry professionals like Garrett Johnston to foster collaboration and drive innovation in integrating Bitcoin with traditional finance.
• Regulators: Evaluate the current framework to incorporate digital assets like Bitcoin, ensuring the insurance industry's safety and soundness.

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