The carbon credits’ market was valued at $2bn in 2022 and is projected to reach $40bn by 2030. Credit: tech_BG/Shutterstock.

Gallagher Specialty has introduced a new carbon insurance solutions service to assist clients in managing the risks tied to their decarbonisation efforts.  

As regulatory and stakeholder pressures mount, companies are increasingly turning to carbon credits, a market valued at $2bn in 2022 and projected to reach $40bn by 2030.  

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These credits, while crucial for global warming mitigation, come with complex and unregulated risks. 

The voluntary carbon market (VCM) presents challenges, including the risk of non-delivery, where buyers may face the inability of providers to deliver purchased reductions.  

This can force businesses to seek alternative, often more expensive, solutions to meet environmental commitments.  

Sellers, on the other hand, must consider the protection of their carbon sequestration methods against natural disasters and weather events.  

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Insurance products are emerging to address these concerns, covering non-delivery, reversal events and the risk of credit invalidation. 

While currently the purchase of carbon credits is largely voluntary, there is a growing trend towards mandating such practices in specific sectors to reduce environmental footprints.  

Gallagher Specialty’s climate risk professionals, led by James Bosley, head of climate strategy, carbon insurance & parametric solutions for Gallagher Specialty, will provide expert advice and develop bespoke insurance solutions to navigate this emerging risk landscape. 

Bosley added: “Carbon insurance provides firms with the ability to de-risk carbon credit transactions, including protecting against the risk of non-delivery, damage to the underlying asset, reversal of the carbon capture or the invalidation of the credit, enabling them to invest with confidence and deliver on their climate aspirations.  

“Our team can advise clients on what insurance cover is available and by using insurance, clients will have an extra layer of security when purchasing or selling carbon credits.” 

Recently, Oka, a carbon insurer, entered the compliance carbon market with Corresponding Adjustment Protect.  

Oka’s new offering is an insurance product designed to protect against the loss of Article 6 authorisation of the Paris Agreement, which could occur if the host country fails to implement corresponding adjustments.