UK-based insurance company Howden has introduced an insurance facility to cover carbon dioxide (CO₂) leakage from commercial-scale CCS facilities.
Reputed to be the first of its kind, the new offering is said to drive the shift towards net-zero emissions.
The insurance product, developed by Howden and led by SCOR’s syndicate at Lloyd’s, offers coverage for environmental damage and revenue loss resulting from both unexpected and gradual CO₂ leakage from CCS projects into the air, land and water.
This insurance solution plays a critical role in supporting the mitigation of the risks linked to CCS technology.
Furthermore, the facility is expected to aid in the emergence of a dedicated insurance market for leakage risks.
This specific need was outlined by the UK Government Department for Energy Security & Net Zero in its Business Model for Carbon Capture, Usage and Storage.
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Several markets within Lloyd’s have pledged support for the facility, with expectations of additional capacity to satisfy global commercial demand.
Howden Climate Risk & Resilience executive director Glenn O’Halloran will spearhead the initiative.
CCS projects’ financial feasibility often hinges on revenues derived from voluntary and compliance carbon markets, stated Howden.
This new insurance offering safeguards against liabilities linked to carbon credits and allowances, encompassing UK and EU Emissions Trading System liabilities.
Howden’s introduction of this insurance facility follows the 2022 launch of the world’s first carbon credit invalidation insurance solution.
Howden Climate Risk and Resilience CEO Rowan Douglas said: “This breakthrough shows how insurance helps unlock vital finance to drive the net-zero transition at the scope and speed required.
“By improving the bankability of critical CCS projects, we are establishing insurance as a force for good and building on the work being done by the Sustainable Markets Initiative (SMI) to realise the potential of engineered carbon removal solutions and move this nascent sector into the mainstream.”
The latest development comes shortly after the company’s acquisition of Scottish personal and commercial lines broker Laurie Ross, which significantly strengthened its high street presence.