Swiss Re’s commercial insurance unit Swiss Re Corporate Solutions, in collaboration with Berlin-based climate start-up goodcarbon, has introduced an insurance product for long-term carbon credit purchases.
The new offering provides in-kind replacements for insured credits with the goal of facilitating the flow of capital into nature-based projects that support critical ecosystems and communities that are vulnerable.
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Swiss Re Corporate Solutions and goodcarbon have crafted an insurance product that enables companies to construct forward-looking carbon credit portfolios spanning five years on a worldwide scale.
This forward carbon insurance is said to be crucial for fostering a liquid forward market by transferring risk and bolstering trust in forward credits, thus providing a mechanism to direct capital into projects by selling insured carbon forwards.
The joint initiative covers the non-delivery risk of forward purchases due to political, natural catastrophe and weather risks.
Initially, the insured forward credits will be available for afforestation and reforestation projects, with delivery terms extending up to five years.
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By GlobalDataTo ensure reliability, each project will contribute a small percentage of credits to a buffer pool, which will serve as a source for in-kind replacements in the event of non-delivery.
If the buffer pool is insufficient, Swiss Re Corporate Solutions will compensate the purchase price.
Swiss Re Corporate Solutions head of sustainability Lasse Wallquist said: “As a sign of Swiss Re’s innovation power, this new insurance product focuses on de-risking long-term carbon credit purchase agreements.
“By transferring the non-delivery risk of such contracts through its partnership with goodcarbon, Swiss Re helps clients increase the resilience of their climate transition plans.”
goodcarbon co-founder and managing director Jerome Cochet said: “This partnership addresses a critical roadblock in the voluntary carbon market.
“It will add liquidity to the forward carbon market and has the potential to unlock much needed private capital to flow into nature-based projects. We are excited to partner with Swiss Re to bring this offering to the market.”
In recent times, several insurance majors have entered the carbon credit insurance fray.
Earlier this week, Tokio Marine Kiln announced an alliance with carbon credit insurance specialist Kita to provide political risk insurance to developers and investors in carbon credit projects.
Meanwhile, last week, Howden placed the first carbon credits Warranty and Indemnity insurance policy, offering cover on the sale of carbon credits for Mere Plantations’ reforestation project of degraded forest lands in Ghana.
