Howden Delivers First-of-its Kind Carbon Credit Insurance Product

To build confidence in the voluntary carbon market, international insurance broker Howden has announced the release of a product that provides insurance against the invalidation of the carbon market (VCM). The product was created in collaboration with the carbon finance company Respira International and the reinsurance risk specialist Nephila Capital. 

Parhelion, a provider of climate risk financing, provided advice to the collaboration. It was created as a result of the Prince Charles-led Sustainable Markets Initiative’s Insurance Task Force’s Product Innovation Workstream. 

According to Howden, the VCM will be crucial in the shift to a low-carbon economy. By 2030, the market for carbon credits is predicted to be worth between $20 billion and $50 billion in US dollars. The VCM’s trading turnover has been expanding rapidly in recent years, reaching just about US$2 billion in 2021. Sixty percent of Fortune 500 firms have established climate goals, and this commitment shows that there has been a significant rise in the market demand for voluntary carbon credits. 

The company claims that the new insurance offering from Howden would increase security. The product offers protection against third-party negligence and fraud because it is surrounded by books of independently certified, high-quality carbon credits. The VCM’s first of its kind, it’s one of the numerous products that Howden is developing to expand the market. 

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

The dominant market for capacity was Nephila’s Syndicate 2357 on Lloyd’s market.