Specialist insurer CFC enters carbon insurance market

Specialist London-headquartered insurer CFC has entered the carbon insurance market with the launch of a new product – carbon delivery insurance. According to CFC, the new product is the first to cover both the physical and political risks faced by businesses purchasing voluntary carbon credits on a forward basis. Carbon delivery insurance covers 100% of the purchaser’s investment for non-delivery of carbon credits. CFC said it has built an underwriting model that rates the carbon project itself rather than the policyholder. The insurers said this “makes the product easy to buy, and negates the need for lengthy, complex application forms and protracted discussions that take weeks to result in a quote. Rather, CFC can deliver same day quoting and binding for a buyer purchasing from one of over 300 carbon projects and counting.” In conjunction with the launch, CFC surveyed more than 500 companies actively involved in the market “to understand the increasing demand among leading market participants for carbon insurance to help mitigate the risks of the voluntary carbon market”. The survey found that 75% of existing buyers are ‘very concerned’ about delivery shortfalls, with 65% having experienced losses from non-delivery. Around 80% said they are very likely to consider purchasing under-delivery insurance, while 50% of non-buyers said they would be more inclined to purchase voluntary carbon credits if they could insure them against non-delivery risk. “Insurance is the mechanism by which all parties involved in the voluntary carbon market can collaborate in their decarbonisation projects with full accountability,” said George Beattie, head of innovation at CFC. “By facilitating risk transfer, we believe that insurers can drive positive change while getting ahead in a market whose value could exceed $1trn by 2050. The introduction of our carbon delivery insurance product represents a further step forward by the industry to protect buyers and galvanise quality growth in this market, empowering market participants to overcome its inherent risks.” CFC has partnered with IncubEx, a carbon innovation platform, with the aim of developing the insurance sector’s role in the voluntary carbon market. “The partnership will deliver API-based distribution of CFC’s carbon insurance products within trading venues such as IncubEx’s TVCM carbon trading platform, and facilitate introduction to specialist insurance brokers who will ultimately execute every deal,” said CFC. Neil Eckert, chairman at IncubEx, said: “We recognise the role that the insurance markets have to play to take the carbon markets to scale. We have been delighted to support insurers in the market, such as CFC, who demonstrate the willingness and leadership to develop new products that will either protect and scale investments in nature and biodiversity, or will support the removal of carbon to tackle climate risk. CFC has a strong track record of innovation, underwriting expertise and distribution partnerships, and will be a very welcome addition to the industry’s offerings to take the carbon market to scale.” Beattie added: “Following 12 months’ intensive research and consultation to ensure we’re delivering a product that provides the peace of mind that the voluntary carbon market is looking for, our carbon delivery insurance proposition marks our first step into the multi-faceted carbon market. To facilitate investment and encourage liquidity across the voluntary carbon market, we already have a number of other products in development to meet the needs of different parts of the carbon value chain.”

Specialist insurer CFC enters carbon insurance market

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