Carbon market solution to transform market confidence

In what has been hailed as the perfect example of what the insurance industry should be doing to enhance climate resilience broker Howden announced it has developed a carbon credit invalidation insurance solution to increase confidence in the Voluntary Carbon Market.

The solution which has been created in partnership with worked with carbon finance business, Respira International, and Nephila Capital, has been described as a vehicle  which will increase confidence in the Voluntary Carbon Market.

David Howden, (above) CEO of Howden Group explained: “This is a perfect example of the insurance market doing what it absolutely must do to drive climate resilience; bringing the client, insurer and broker all to the table to create brand new products that help to accelerate and de-risk the move to a more sustainable future.”

Capacity came from the Lloyd’s market, with Nephila’s Syndicate 2357 as the lead market.

“From first meeting the Howden and Respira teams at COP26, it’s been a really enjoyable, collaborative process getting this ground-breaking product live. We are proud to support the growth of a market that is so important for climate resilience, “Maria Rapin, CEO of Nephila Climate.

Trading turnover of the VCM has increased steadily over recent years to just under $2 billion in 2021. A total of 60% of Fortune 500 companies have now set climate targets and these commitments point to substantial increases in demand for voluntary carbon credits. Various estimates suggest that the market for carbon credits could be worth between $20 billion and $50 billion by 2030.

However, Howden said the VCM remains complex, particularly for new buyers, and doesn’t deliver consistently for carbon reduction and removals projects on the ground. In order to support future growth, it is critical that the VCM implement processes to improve credibility and transparency and to differentiate independently verified, high-quality credits from unverified credits, thereby helping buyers to engage with confidence.

The product, which is wrapped around books of independently verified, high-quality carbon credits, provides cover for third-party negligence and fraud. It is the first product of its kind for the VCM, and one of a suite of products that Howden is working on to help to grow the market to the scale needed to support global net zero targets.

Charlie Langdale, head of climate risk and resilience at Howden, said: “For the voluntary carbon market to grow to $50 billion by 2030, buyers need to be able to trust that the carbon credits they are buying are removing the promised volume of carbon from the atmosphere.

“The added layer of security provided by this product, combined with independent verification from established, reputable bodies will help buyers to purchase with confidence and should drive more buyers towards high-quality projects like those in Respira’s portfolio.”