Hong Kong financial technology firm OneDegree is on track to turn profitable next year on the back of its popular insurance policies for household pets and digital assets, according to company co-founder and chief executive Alvin Kwock Yin-lun. The seven-year-old start-up, one of the city’s four licensed virtual insurers, this year expects to roughly halve its underwriting losses, which totalled HK$121.8 million in 2022, and then turn a profit by the second half of 2024, Kwock said in an interview on Tuesday. That optimistic projection stems from the positive performance of OneDegree’s pet and digital-asset insurance operations. The company’s flagship pet insurance business, which was launched in April 2020, has “reached scale” and become profitable, Kwock told the South China Morning Post. He said the firm’s enterprise-facing digital-asset insurance service, OneInfinity, has recently become profitable after signing up more than 30 clients, without receiving any claims to date. Introduced in November 2021, OneInfinity offers insurance to digital-asset businesses such as cryptocurrency exchanges, custodians and wallet providers. It already accounts for 10 per cent of OneDegree’s revenue, according to Kwock. He said the firm expects that figure to swell to 30 per cent in the fourth quarter this year. That potential growth reflects the local fintech industry’s confidence in the Hong Kong government’s efforts in promoting the city as a global digital-asset hub. Global interest in Hong Kong’s crypto exchange licensing regime has been strong, according to Kwock. He indicated that nearly half of the world’s top-20 crypto exchanges have contacted OneDegree about its OneInfinity insurance. Online insurer OneDegree raises US$27 million to expand digital assets coverage Hong Kong’s new regulatory regime for centralised crypto exchanges, in effect since June this year, puts in place a broad range of exacting requirements for these enterprises to operate in the city. One of the mandatory requirements is for crypto exchanges to have insurance or compensation arrangements that would cover potential losses. Kwock said OneDegree has to be “extremely prudent” when it takes on a digital-asset business as a customer owing to “a number of bad actors” in the space, referring to recent scandals involving crypto exchanges FTX and JPEX. OneDegree’s underwriting process includes examining the applicant’s custody architecture and cybersecurity setup, among a host of things. The firm has so far only accepted 25 per cent of all insurance applications over the past two years, according to Kwock. Hong Kong virtual insurer OneDegree widens cryptocurrency coverage to NFTs OneDegree has conducted five rounds of fundraising to date. In June, the company raised US$27 million from investors that include Gobi Partners, Sun Hung Kai and Bitrock to finance the expansion of its digital-asset insurance portfolio. Kwock said OneDegree is now seeking to expand into the Middle East, while investing “heavily” in different artificial intelligence (AI) applications. The company, for example, is building an AI recommendation engine for consumers and a security operations centre that provides guidance for users in case of cybersecurity breaches. On potential plans to go public, Kwock said OneDegree’s current focus is on achieving profitability, after which it may consider an initial public offering or other capital market initiatives.