Bermuda insurers are denying or limiting coverage to clients with exposure to bankrupt crypto exchange FTX, the news agency Reuters is reporting.

Specialist underwriters here and in the Lloyd’s of London markets are taking action that will leave digital currency traders and exchanges uninsured for any losses from hacks, theft or lawsuits, several market participants have said.

The insurers are requiring more transparency from crypto companies about their exposure to FTX and proposing broad policy exclusions for any claims arising from the company's collapse.

Insurers were already reluctant to underwrite asset and directors and officers protection policies for crypto companies because of scant market regulation and the volatile prices of Bitcoin and other cryptocurrencies.

But with the sudden collapse of FTX last month, concerns have been amplified.

Bermudian-based crypto insurer Relm, which previously has provided coverage to entities linked to FTX, is taking a strict approach.

"If we have to include a crypto exclusion or a regulatory exclusion, we're just not going to offer the coverage," said Relm co-founder Joe Ziolkowski.

He said one of the most pressing questions was whether insurers would cover D&O policies at other companies that had dealings with FTX, given the problems facing the exchange's leadership.

While the least risky parts of the crypto market, such as companies that own cold wallets storing assets on platforms not connected to the internet, may get cover for up to $1 billion, a D&O insurance policyholder's cover may now be limited to tens of millions of dollars for the rest of the market, Mr Ziolkowski said.

US prosecutors said that former FTX chief executive officer Sam Bankman-Fried had engaged in a scheme to defraud FTX's customers by misappropriating their deposits to pay for expenses and debts and to make investments on behalf of his crypto hedge fund, Alameda Research LLC.

Kyle Nichols, president of broker Hugh Wood Canada Ltd, said insurers were requiring clients to fill out a questionnaire asking whether they invested in FTX or had assets on the exchange.

Lloyd's of London broker Superscript is giving clients that dealt with FTX a mandatory questionnaire to outline the percentage of their exposure, said Ben Davis, its lead for digital assets.

"Let's say the client has 40 per cent of their total assets at FTX that they can't access, that is either going to be a decline or we're going to put on an exclusion that limits cover for any claims arising out of their funds held on FTX," he said.

The exclusions denying payout for any claims arising out of the FTX bankruptcy are found in insurance policies that cover the protection of digital assets and for personal liabilities of directors and officers of companies that deal in crypto, five insurance sources told Reuters.

One broker said a couple of insurers had been pushing for a broad exclusion to policies for anything related to FTX.

Exclusions may act as a fail-safe for insurers and will make it even more difficult for companies that are seeking coverage.

D&O policies, which are used to pay legal costs, do not always pay out in cases of fraud.

Insurance sources would not name their clients or potential clients that could be affected by policy changes, citing confidentiality.

Reuters said that such firms with financial exposure to FTX included the crypto exchange Binance and the crypto lender Genesis, neither of which responded to e-mails seeking comment.

The FTX collapse will also likely lead to a rise in insurance rates, especially in the American D&O market, insurers said.

The rates are already high because of the perceived risks and lack of historical data on cryptocurrency insurance losses.