Vault Insurance
Vault insurance is the comprehensive risk protection framework applied to physical bullion held in professional storage facilities.
It guarantees that the stored gold remains financially protected against loss, theft, or damage, and that clients retain full recoverable value even in the event of operational or catastrophic incidents.
Vault insurance underpins the security and credibility of the institutional custody system by ensuring that every ounce of gold held within a vault has documented and insured value continuity.
Definition and Coverage Purpose
Vault insurance is an all-risk insurance policy that covers physical bullion stored under professional custody.
The coverage extends to all stages of possession — including storage, internal movement, and authorized transport — provided the metal remains within the insured custody chain.
The purpose is twofold:
- To safeguard the asset holder from financial loss due to theft, fire, or damage;
- To ensure institutional liability continuity, protecting both client and custodian interests.
Such policies are mandatory for vaults operating under LBMA accreditation or equivalent regulatory oversight.
Scope of Coverage
A standard vault insurance program may include:
- Theft and burglary — including insider theft, armed robbery, or forced entry;
- Fire and natural disaster — coverage for damage caused by fire, flood, earthquake, or other acts of nature;
- Transit risk — protection for bullion moved under bonded carriers or during vault-to-vault transfers;
- Mysterious disappearance — loss during counting or reconciliation;
- Damage or contamination — due to improper handling or environmental exposure.
Coverage typically applies on an “all-risk basis”, meaning any unforeseen loss not explicitly excluded in the policy is covered.
Policy Structure and Insurers
Vault insurance is usually arranged through specialized underwriters in London, Zurich, or Singapore, often within the Lloyd’s of London syndicate.
Policies are structured as:
- Primary coverage for the first layer of liability (up to a defined limit per vault);
- Excess coverage extending protection beyond the primary cap;
- Transit endorsements covering movements under secure logistics providers.
Underwriters require detailed operational data from the vault — including construction specifications, surveillance systems, staff background checks, and dual-control protocols — before issuing coverage.
Valuation and Claims Handling
The insured value is based on the market price of gold at the time of loss, referenced against verified barlists and daily valuation records.
Each bar or coin must be identifiable by serial number and weight, and registered within the insured inventory to qualify for recovery.
In the event of loss or damage, a claim is initiated jointly by the vault operator and the custodian.
Documentation includes:
- Incident report and security footage;
- Barlist cross-verification;
- Independent auditor statement;
- Valuation certificate from the insurer.
Upon confirmation, compensation is paid directly to the insured party or beneficiary designated in the custody agreement.
Compliance and Risk Management
Vault insurance is integrated into the vault’s risk management framework, ensuring alignment with AML/KYC obligations and regulatory oversight.
Policies must explicitly state that coverage applies only to legally sourced and declared metal, in accordance with OECD Responsible Sourcing and LBMA due diligence requirements.
Annual insurance reviews are required to maintain coverage validity, accompanied by internal and external vault audits to confirm physical existence and inventory integrity.
Institutional Role
Vault insurance provides the financial backbone of global gold custody.
It transforms physical security into legally enforceable protection, allowing institutions, central banks, and high-net-worth clients to hold bullion with documented assurance of value preservation.
By combining verified storage, regulated custody, and comprehensive insurance, institutional vaults create a transparent environment where gold ownership remains both physically secured and financially guaranteed.