Carbon credit invalidation insurance is a new product that will be offered by international insurance broker Howden, with the intention of boosting consumer confidence in the voluntary carbon market (VCM). The product was established in collaboration with Respira International, a company that specializes in carbon finance, and Nephila Capital, an investment manager that focuses on reinsurance risk. Together, they created the product.
Parhelion, which is a climate risk finance company, served as an advisor to the collaboration. It was conceived within the framework of the work stream devoted to product innovation that was part of the Insurance Task Force of the Sustainable Markets Initiative, which was directed by Prince Charles.
According to Howden, the VCM will be an extremely important component in the movement toward a low-carbon economy. According to some projections, the value of the carbon credit market in 2030 might range anywhere from $20 billion to $50 billion United States dollars. The volume of trading activity on the VCM has been rapidly increasing over the past few years, and it is projected to reach slightly under $2 billion in 2021. These climate targets, which have been established by a total of sixty percent of the Fortune 500 firms, show large increases in demand for carbon credits that are voluntary.
According to Howden, despite the promise of VCM, carbon reduction and removal projects on the ground do not see consistent delivery of results. The broker emphasized how important it was for VCM to put in place procedures that would enhance the company’s credibility and transparency, as well as separate independently certified, high-quality carbon credits from unverified credits.
According to the corporation, the new insurance policy that Howden is offering will constitute an additional safety measure. This product, which is encased in books of carbon credits of a high quality and independently certified by a third party, offers protection against the carelessness and dishonesty of third parties. It is the very first product of its kind for the VCM, and it is only one of numerous goods that Howden is working on to assist in the expansion of the industry.
According to Charlie Langdale, head of climate risk and resilience at Howden, “for the voluntary carbon market to develop to US$50 billion by 2030, buyers need to be able to trust that the carbon credits they are buying are eliminating the projected volume of carbon from the atmosphere.” “The additional layer of security that is provided by this product, combined with independent verification from established, reputable bodies, will help buyers to purchase with confidence and should drive more buyers toward high-quality projects like those that are in Respira’s portfolio,” said the company.
Ana Haurie, co-founder and CEO of Respira, stated that “the voluntary carbon market is a key piece of the puzzle” in reference to the company’s goal of reaching “net zero.” “Respira is dedicated to enhancing the integrity and transparency of the market, and this product will appeal to the many corporations and financial services companies that wish to engage in buying high-quality carbon credits as part of their own pathways to net zero and to carbon projects keen to provide buyers with the highest assurance. ” This will make it possible for funding that is desperately required to be channeled into high-quality carbon projects on the ground.
According to David Howden, CEO of Howden Group, “This is a perfect example of the insurance market doing what it absolutely must do to drive climate resilience – bringing the client, insurer, and broker all to the table to create brand-new products that help accelerate and de-risk the move to a more sustainable future.” “Bringing the client, insurer, and broker all to the table to create brand-new products that help accelerate and de-risk the move to a more sustainable future.”
The Lloyd’s market provided the capacity for the transaction, with Nephila’s Syndicate 2357 serving as the lead market.