The Rock Insurance Co: Insuring Bank Deposits in Second Life

One of the things that many people have been clamoring for is transparency when it comes to investment. I've spent a lot of time talking with people about transparency, from Linden Lab to WSE to Ginko Financial. Right now, there isn't a pretty picture regarding finance in Second Life - and while we can say that there are untrustworthy people all over, it boils down to trust and value. There's an insurance company in Second Life I uncovered which is claiming to help with that: The Rock Insurance Co..

They didn't contact me. I found them in my research. And I chatted with them for some time at their office (Hayek; 160,74,30). When I got there, I bumped into Paci Barbarossa - the CTO¹, and we chatted for a while about the concept before Eliale Morigi, the CEO, popped in to chat with me. I had already registered with their website and was tinkering with it - it is well done - but it also required me to think a bit differently than I had grown used to. It is based not on balances, but certificates which you purchase from them.

An example at the time of this writing is that to insure 100,000 L at JTFinancial's bank costs 1,000 L for 30 days. This is a small portion of the percentage paid to someone who would invest in JT Financial - as an example. For WSE (OurBank), insuring 250,000L costs 1000L for 30 days. The cost for the insurance, Eliale told me, is dependent on many factors.

The general idea is to establish some credibility in Second Life investment while also encouraging banks within Second Life to become more transparent. Eliale says that in the future they are planning to put together a transparency index which is directly proportionate to the amount of transparency a bank in Second Life has.

But then, how credible are the insurers? From our conversation²:

[10:56] You: some people will ask why you should be trusted with the insurance - what would you say to that?
[10:58] Eliale Morigi: true, I would ask the same question... For now, it is only trust like any other business in sl... I have different investments that you can verify at WSE thanks to the major shareholders lists...
[10:58] Eliale Morigi: then
[10:58] You: well, it is a difficult question too. better to get it out of the way now.
[10:58] You: ok, that makes sense.
[10:58] Eliale Morigi: we are independent from any institution and private..
[10:59] Eliale Morigi: all you see, is paid and we have no debts.. Paci, CTO did the web site and he was compensate in lindens not promises...

That said, further conversation demonstrated that the company is aware of conflict of interest issues - for example, it is practical that they would retain some funds in banks to gain interest themselves, but it is something that they keep an eye on. When asked further on this, Eliale said that if all banks were to fail at once right now, they would not be able to handle all the certificates without touching their real life reserves - but that if the largest bank did fall, they could cover it.

While they are presently not giving out certificates on Ginko Financial (they have them halted), Eliale did disclose that they had issued one certificate to someone banking with Ginko Financial - and if necessary, they will honor that certificate³.

From our discussion, I think that this may be a big part of mitigating banking risk within Second Life by insuring deposits, as well as by encouraging transparency. From a business angle, it is an interesting way to make money while providing a service. And at a consumer angle, the cost of the service is relatively small when compared to the interest return on their bank investments.

Personal Opinion

Is this good? My opinion is yes. I believe that this is a good start to assuring risk mitigation in financial investment within Second Life. Is it enough? No, it is not - but it is probably the best thing possible (so far) within the Linden Lab framework.

Do I endorse The Rock Insurance Company? I cannot do that, I don't endorse anyone. I can say I expect that I'll use them in the future. 1,000L risk on 100,000L which is making 150L a day pays for itself in 7.5 days. Do the math. Assess the risk. Make an informed decision - as a good investor would. In the end, your money is your responsibility and no endorsement will make that go away.

While Philip Linden is discussing real vs. virtual, some people are making the virtual more real.

Let him talk. We have work to do within the limited framework Linden Lab gives us. Maybe Philip could talk about that.

¹He's also got a real life Linux business: PROSA.
² To his credit, Eliale handed me his personal information in a notecard - name, phone number, etc. I will not disclose that information here - it is for him to disclose, not me, but I can report that he did.
³ I wish I had that certificate. Can I buy it for 5000L? :-D