CFC enters carbon insurance market with ‘groundbreaking’ solution

London MGA CFC is entering the carbon insurance market with the launch of a “groundbreaking” new product providing coverage against the non-delivery of carbon credits.

CFC said its innovative approach is aimed at protecting buyers and driving “quality growth” in the voluntary carbon market.

The new carbon delivery insurance is said to be the first to cover both the physical and political risks faced by businesses purchasing voluntary carbon credits on a forward basis. It covers 100% of the purchaser's investment for non-delivery of carbon credits.

CFC has built an underwriting model that rates the carbon project itself rather than the policyholder. The company explained that the model makes the product easy to buy, and negates the need for lengthy, complex application forms and protracted discussions that take weeks to result in a quote. 

CFC said in order to understand the increasing demand among leading market participants for carbon insurance to help mitigate the risks of the voluntary carbon market (VCM), it surveyed over 500 companies actively involved in the market.

In addition to launching Carbon Delivery Insurance through its traditional broker distribution channel, CFC has also partnered with carbon innovation platform IncubEx. The partnership aims to develop the insurance sector's role in the market, deliver API-based distribution of CFC's carbon insurance products within trading venues such as Incubex' TVCM carbon trading platform, and facilitate introduction to specialist insurance brokers who will ultimately execute every deal.

George Beattie, head of innovation at CFC, said: "Insurance is the mechanism by which all parties involved in the voluntary carbon market can collaborate in their decarbonisation projects with full accountability. 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.

"The introduction of our Carbon Delivery Insurance product represents a further step forward by the industry to protect buyers and galvanise quality growth in this market, empowering market participants to overcome its inherent risks."

Neil Eckert, chairman at IncubEx, added: "IncubEx recognises the role that the insurance markets have to play to take the carbon markets to scale. We have been delighted to support insurers in the market, such as CFC, who demonstrate the willingness and leadership to develop new products which will either protect and scale investments in nature and biodiversity, or will support the removal of carbon to tackle climate risk. CFC has a strong track record of innovation, underwriting expertise and distribution partnerships and will be a very welcome addition to the industry's offerings to take the carbon market to scale."

"Following 12 months' intensive research and consultation to ensure we're 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," added Beattie. "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."

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