CFC said its product offers 100% coverage of the purchaser’s investment in the event of non-delivery of carbon credits. Credit: tech_BG/Shutterstock.

CFC, a UK-based specialist insurance provider, has ventured into the carbon insurance market with the introduction of Carbon Delivery Insurance.  

This product aims to address the physical and political risks associated with the purchase of voluntary carbon credits on a forward basis.  

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CFC said its product offers 100% coverage of the purchaser’s investment in the event of non-delivery of carbon credits. 

The company has developed an underwriting model that evaluates the carbon project itself, rather than the policyholder.  

This approach is said to simplify the purchasing process, eliminating the need for complex application forms and lengthy discussions.  

Consequently, CFC offers same-day quoting and binding for buyers from an expanding list of more than 300 carbon projects. 

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CFC’s market research, involving a survey of more than 500 companies active in the voluntary carbon market (VCM), reveals significant demand for carbon insurance.  

The survey highlights that 75% of buyers are ‘very concerned’ about potential delivery shortfalls, with 65% having already suffered losses due to non-delivery.  

Furthermore, 80% expressed a high likelihood of considering under-delivery insurance, and 50% of non-buyers indicated they would be more inclined to engage in purchasing voluntary carbon credits if insurance against non-delivery risk was available. 

To facilitate the distribution of Carbon Delivery Insurance, CFC is leveraging its traditional broker network and has also formed a strategic partnership with IncubEx.

CFC head of innovation George Beattie said: “By facilitating risk transfer, we believe that insurers can drive positive change while getting ahead in a market whose value could exceed $1trn by 2050.  

“Following 12 months’ intensive research and consultation to ensure we are delivering a product that provides the peace of mind that the voluntary carbon market is looking for, our Carbon Delivery Insurance proposition marks our first step into the multi-faceted carbon market. 

“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.” 

In other carbon insurance industry news, earlier this year, insurance broker Howden launched an insurance offering to cover CO2 leaks from commercial-scale carbon capture and storage facilities.