Tokio Marine Kiln (TMK), a subsidiary of insurance major Tokio Marine, has entered a partnership with carbon credit insurance specialist Kita.
This collaboration aims to offer political risk insurance to developers and investors in carbon credit projects.
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The product, steered by TMK head of special risks Ed Parker, is designed to protect against political uncertainties that could jeopardise the sale and export of carbon credits.
Such risks include expropriation, nationalisation, forced abandonment, licence revocation and political violence.
The insurance will compensate for losses if a project’s host nation withdraws agreements critical for the credits to be used in external offsetting strategies.
Amidst escalating political instability worldwide, carbon credit initiatives face heightened risks that can disrupt their operations and credit sales.
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By GlobalDataThis insurance product aims to address these challenges, providing a layer of security for investors and fostering trust in the voluntary carbon market.
The introduction of this coverage is expected to bolster the feasibility of new projects by offering an additional layer of due diligence from Kita and TMK.
Parker said: “We are at a critical juncture when it comes to offsetting strategies. They could not be more vital as the world tries to move at pace towards net zero, but increasing political instability is impacting projects designed to produce carbon credits.”
Kita head of insurance James Kench said: “Political uncertainty in the carbon markets is holding back necessary financing of high-quality projects. Political Risk insurance has the potential to significantly mitigate the risks associated with correspondingly adjusted credits and protect anyone investing or operating in politically uncertain environments.
“Working with TMK to deliver this essential cover will help to unlock more investment into the voluntary carbon market to drive climate action now.”
Last month, Kita partnered with Wilder Carbon to insure a buffer pool of carbon credits.
This reserve is contributed to by project developers and serves to uphold the integrity and reliability of carbon schemes, safeguarding the interests of buyers.
