Atlantic Unveils First Insurance For 45Q Carbon Capture Tax Credits

Atlantic Unveils First Insurance For 45Q Carbon Capture Tax Credits - Carbon Herald

Atlantic Global Risk steps into the spotlight with the groundbreaking placement of the first tax liability insurance policy specifically designed for the 45Q carbon capture tax credit. 

This landmark achievement supports a major transaction within the CCS sector.

The Inflation Reduction Act proved to be a game-changer for a large Midwestern facility owner – a client of Atlantic Global Risk

They seized the opportunity presented by Section 45Q’s financial incentives to pursue both environmental and economic goals. 

Their CCS project aims to capture and securely store millions of tons of CO2 underground over the 12-year crediting period offered by Section 45Q.

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To finance this ambitious project, the client implemented a tax equity “partnership-flip” structure for a portion of the crediting period. 

Future financing will likely involve additional tax equity deals or transfers, depending on the most favorable option.

Given the critical role 45Q tax credits play in the project’s financial viability, potential credit loss posed a significant risk due to the client’s guarantee obligations. 

While the tax equity investor, impressed by the client’s strong credit rating, didn’t require tax insurance, the client recognized the immense value of a robust policy backed by top-tier insurers. 

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This policy safeguards against potential losses related to credit qualification, transferability, and recapture.

Through close collaboration with practically all North American tax insurance underwriters, Atlantic crafted and placed the first-of-its-kind 45Q tax insurance policy. This comprehensive solution protects the client from a wide range of issues that could jeopardize their tax credits.

Finalized in February 2024, the policy boasts a 10-year coverage period with a substantial liability limit of $785 million. This translates to robust protection for the client’s investment and unwavering commitment to sustainability efforts.

Minneapolis-based Brown & Brown Insurance‘s energy practice, responsible for the client’s casualty insurance, played a pivotal role in securing this comprehensive insurance package and ensuring a smooth placement process.

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