Swiss Re and goodcarbon Introduce Insurance Product for Long-Term Carbon Credit Purchases
Swiss Re’s commercial insurance unit, Swiss Re Corporate Solutions, has partnered with Berlin-based climate start-up goodcarbon to introduce a new insurance product for long-term carbon credit purchases. This innovative offering aims to facilitate the flow of capital into nature-based projects that support critical ecosystems and vulnerable communities.
The insurance product allows companies to build forward-looking carbon credit portfolios spanning five years on a global scale. This forward carbon insurance is essential for creating a liquid forward market by transferring risk and enhancing trust in forward credits, ultimately directing capital into projects by selling insured carbon forwards.
The joint initiative covers the non-delivery risk of forward purchases due to political, natural catastrophe, and weather risks. Initially, the insured forward credits will be available for afforestation and reforestation projects, with delivery terms extending up to five years.
To ensure reliability, each project will contribute a small percentage of credits to a buffer pool, which will serve as a source for in-kind replacements in case of non-delivery. If the buffer pool is insufficient, Swiss Re Corporate Solutions will compensate the purchase price.
Lasse Wallquist, head of sustainability at Swiss Re Corporate Solutions, highlighted the importance of this new insurance product in de-risking long-term carbon credit purchase agreements. By partnering with goodcarbon, Swiss Re helps clients increase the resilience of their climate transition plans.
Jerome Cochet, co-founder and managing director of goodcarbon, emphasized that this partnership addresses a critical roadblock in the voluntary carbon market. It has the potential to add liquidity to the forward carbon market and unlock much-needed private capital for nature-based projects.
In recent times, several insurance majors have entered the carbon credit insurance arena. Tokio Marine Kiln recently announced an alliance with carbon credit insurance specialist Kita to provide political risk insurance to developers and investors in carbon credit projects. Howden also placed the first carbon credits Warranty and Indemnity insurance policy, offering cover on the sale of carbon credits for Mere Plantations’ reforestation project in Ghana.
Overall, the collaboration between Swiss Re Corporate Solutions and goodcarbon represents a significant step towards promoting sustainable investments in nature-based projects. This new insurance product not only mitigates risks for companies but also contributes to the preservation of critical ecosystems and communities worldwide.