Vero expects significant growth in its carbon sink insurance product as the carbon tax’s July 1 introduction approaches.

The cover is designed to protect Australians who plant and grow forests for their long-term benefits in sequestering carbon.

Vero’s Leader Portfolio and Pricing Adam Davies says the market is small but could grow to $500 million in 10 years. 

“As we get further down the path of global warming and pressure increases on big companies, the investment in carbon forests is only going to increase,” Mr Davies told insuranceNEWS.com.au.

Carbon sink insurance supports carbon offsetting. It applies only to trees planted for the long term and not grown for commercial purposes.

The quantity of carbon sequestered by trees can be measured and sold as carbon credits to companies offsetting their greenhouse emissions.

If a tree falls or burns, it releases carbon back into the atmosphere. The carbon credit no longer exists and the farmer must refund the money paid for it. Carbon sink insurance covers this loss.

“The value is the carbon sequestered by the tree,” Mr Davies said, adding that the value of the tree itself can be covered under a standard timber policy.

“The policy also offers additional coverage for replanting costs and the future value of carbon,” he said.

It covers risks including fire, hail, impact, lightning and malicious damage, with additional cover for windstorm.

Vero is partnering SA-based niche crop insurance underwriting agency Insurance Facilitators with the product.