CFC develops new policy aimed at carbon delivery

Specialist insurer CFC has announced its foray into the carbon insurance market with a brand-new offering.

The newly introduced Carbon Delivery Insurance by CFC is also notably the industry’s first product designed to safeguard businesses against both physical and political risks that could impede the delivery of voluntary carbon credits, the MGA states.

The new policy guarantees coverage for the full value of the buyer’s investment in the event of non-delivery of carbon credits, providing a significant layer of financial protection.

With the new proposition, CFC explains that it aims to further associate with the voluntary carbon credits market, a sector experiencing rapid growth and increasing demand for risk mitigation solutions.

Utilizing a new underwriting approach, CFC evaluates the carbon project itself rather than the policyholder to eliminate the need for extensive application procedures, allowing for same-day quote and policy issuance. This product is available for over 300 carbon projects, with the list expanding.

CFC’s entry into the market was also driven by a recent survey of over 500 companies actively participating in the voluntary carbon market (VCM), with results revealing significant concern among buyers about potential delivery shortfalls. Three quarters (75%) were revealed to be “very concerned” and 65% have already faced losses due to non-delivery.

George Beattie, head of innovation at CFC, emphasized the role of insurance in promoting positive change within the voluntary carbon market.

“By facilitating risk transfer, we believe that insurers can drive positive change while getting ahead in a market whose value could exceed $1 trillion by 2050,” Beattie said.

To further its objectives, CFC has also partnered with IncubEx, a carbon innovation platform, to integrate its carbon insurance products within carbon trading venues and facilitate connections with specialized insurance brokers. Neil Eckert, chairman at IncubEx, praised CFC’s initiative and innovation, recognizing the critical role of insurance in scaling the carbon markets.

“To facilitate investment and encourage liquidity across the voluntary carbon market, we already have a number of other products in development to meet the needs of different parts of the carbon value chain,” Eckert said.

What are your thoughts on this story? Please feel free to share your comments below.