Markets/Coverages: CFC Introduces Carbon Delivery Insurance Policy

Specialty insurer CFC announced its entry in the carbon insurance market with the launch of a groundbreaking new product.

CFC said its new carbon delivery insurance 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 has built a sophisticated underwriting model that rates the carbon project rather than the policyholder. 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, the company said.

To understand the increasing demand among leading market participants for carbon insurance to help mitigate the risks of the voluntary carbon market (VCM), CFC surveyed over 500 companies actively involved in the market.

• 75% of existing buyers are ‘very concerned’ about delivery shortfalls
• 65% have experienced losses from non-delivery
• 80% said they are very like to consider purchasing under-delivery insurance
• 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 decarbonization projects with full accountability. By facilitating risk transfer, we believe that insurers can drive positive change while getting ahead in a market whose value could exceed $1 trillion by 2050,” said George Beattie, head of innovation at CFC.

CFC said it has also partnered with IncubEx – a fast-growing carbon innovation platform at the cutting edge of the voluntary carbon market. The partnership aims to develop the insurance sector’s role in the market, deliver API-based distribution of CFC’s carbon insurance products within trading venues such as Incubex’ TVCM carbon trading platform, and facilitate introduction to specialist insurance brokers who will ultimately execute every deal.

“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,” added Beattie. “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.”

An in-depth report from CFC provides additional details on how the VCM works, the challenges it faces and why the insurance industry’s involvement is key to driving its growth and sustainability.