Carbon insurance specialist Kita is teaming up with international specialty insurance and reinsurance group Chaucer with the aim of insuring the delivery risk of carbon sequestration projects.
This would mark the first of its kind instance of bringing such insurance products to the carbon markets.
Kita’s product, Carbon Purchase Protection Cover, covers a critical protection gap for businesses that choose to invest in high-quality carbon sequestration projects by purchasing carbon credits.
Namely, it insures such businesses against delivery risk of forward purchased carbon credits, which, in turn, increases buyer trust and can help boost the flow of capital towards carbon sequestration projects at a rate that will help make a meaningful impact on climate change.
To illustrate the importance of having insurance in the event that a carbon sequestration project may not deliver forward purchased carbon credits, we can examine the following example.
Say a company buys high-quality, verified carbon credits from an afforestation project that burns down as a result of a wildfire.
The carbon that should have been sequestered by the newly planted trees in the project and was pre-paid for by the company ended up not being sequestered after all, and the company will not have offset the amount emissions for which it purchased the carbon credits.
Kita’s Carbon Purchase Protection Cover protects the company from this risk.
“Carbon sequestration projects will play a key role in the fight against climate change and Kita, alongside Chaucer, will be instrumental in enabling higher integrity in the carbon markets by safeguarding the quality and performance of carbon purchases,” said Hayley Maynard, Head of Innovation at Chaucer.
Maynard went on to also say that she believes that by investing in Kita, Chaucer will play a key role in revolutionizing the carbon credit industry.