Report explores emerging carbon credit insurance market

Report explores emerging carbon credit insurance market

Report explores emerging carbon credit insurance market | Insurance Business UK

Co-authors say it’s a question of ‘when’, not ‘if’

Report explores emerging carbon credit insurance market


Terry Gangcuangco

“The exponential growth of insurance in this market is not a question of if, but when.”

Those were the words of specialist insurance management consultancy Oxbow Partners and carbon insurance company Kita, co-authors of the “Gross Written Carbon: Are carbon credits the next billion-dollar insurance market?” report that was released this morning.

In the 56-page document, Kita and Oxbow Partners explored the benefits that insurance brings to the world of carbon credits and how the emerging carbon credit insurance market could reach US$1 billion by 2030.

“The carbon markets are still nascent, and there are significant risks that are not currently being managed effectively,” reads part of the report. “For example, what happens if you buy a carbon credit from a carbon project and the company goes bust? Or there is political instability halting the issuance of credits? Or there is a wildfire which destroys the project? These risks and several others have historically been managed in the carbon markets via contractual arrangements between the counterparties.

“Insurance is an essential mechanism in managing risk and has been tried and tested in other markets successfully. Demand for risk transfer within the carbon markets has grown, revealing a significant opportunity for the insurance industry to both make a positive impact and build a profitable book of business in a new potential market of US$10-30 billion annual GWP (gross written premium) by 2050.”

Oxbow Partners sustainability practice head Miqdaad Versi believes that, if the world is going to decarbonise, this particular insurance market will inevitably accelerate.

“The carbon credit insurance market is an exciting opportunity for those looking for an avenue to be green with integrity and make a profit,” Versi said in an emailed release. “With new capacity providers already entering in 2024, the future looks bright.”

Meanwhile Kita insurance head James Kench had this to say: “The insurance market is on the front line for climate risk and is uniquely placed to help business and society navigate through increasingly uncertain times. This report is a call to action for the insurance industry to embrace a vast new carbon risk pool with purpose.”  

The report, which will be discussed during a webinar tomorrow, includes insights from Aon, AXA XL, CFC, Chaucer, Fidelis MGU, Howden, and Marsh.             

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