Chaucer, a global specialty (re)insurance group, has partnered with carbon credit insurance specialist Kita to bring the first of its kind insurance product to the carbon markets.
Kita protects carbon credit buyers against the risk of carbon sequestration projects failing to deliver expected volumes of high-quality carbon credits.
Kita’s first product, Carbon Purchase Protection Cover, insures the buyer of forward purchased carbon credits against delivery risk, removing a significant protection gap.
For example, a company with a high-integrity net zero strategy might forward purchase carbon removal credits in an afforestation carbon project, with the aim of enabling an environment in which young trees can grow, capturing carbon and generating biodiversity benefits.
Carbon Purchase Protection Cover protects against the risk that the afforestation project doesn’t generate verified high-quality carbon credits.
This could arise due an avoidable loss, such as the forestry project developer making an error in the planting phase, and unavoidable loss such as a natural catastrophe, or rraud or negligence which invalidates the carbon credits prior to delivery.
Increased buyer trust in carbon delivery, Chaucer said, leads to greater flows of capital to help scale carbon sequestration projects at the rate necessary to fight the climate crisis. Chaucer is investing in Kita as well as providing lead underwriting capacity; follow capacity will be provided by Munich Re Syndicate and RenaissanceRe.
Hayley Maynard, head of innovation at Chaucer, said, “Carbon sequestration projects will play a key role in the fight against climate change and Kita, alongside Chaucer, will be instrumental in enabling higher integrity in the carbon markets by safeguarding the quality and performance of carbon purchases.
“Chaucer is delighted to partner with Kita. Providing insurance for carbon credit projects will give businesses the confidence they need to invest at scale in high quality carbon sequestration projects and meet their net zero targets.”
Last year, International insurance broker Howden launched a voluntary carbon credit insurance product in partnership with Respira International and Nephila Capital.
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