Insurtech Kita has raised £4 million ($7.1 million) which it says will allow it to bring the first of its essential carbon insurance products to market as it builds a portfolio to protect against risks for all parties in carbon markets.

Kita, part of Lloyd's Lab cohort 8, is backed by Insurtech Gateway, as well as Octopus Ventures, Carbon13, Climate VC, and new investors Chaucer Group and Hartree Partners.

Kita has secured regulatory approval and approval as a Lloyd’s of London coverholder, and has onboarded insurance partners, including Chaucer Group, which is providing lead underwriting capacity.

It will now launch Carbon Purchase Protection Cover, which protects buyers of forward purchased carbon-removal credits against under delivery, which Kita says is a significant protection gap.

Kita says lack of transparency and quality metrics within the Voluntary Carbon Market (VCM) create a high-risk environment which is a deterrent to financing at scale, and insurance can act as an essential enabler.

Octopus Early-stage Investor Natasha Jones says carbon removal plays a critical role in the fight against climate change and there is a pressing need to scale these technologies.

"Insurance is essential to enable this rate of growth by de-risking investments into carbon removal solutions and building in incentives that increase the supply of high-quality carbon credits in the market,” she said.

Kita’s ‘first of its kind’ carbon insurance solutions would "help unlock billions of dollars of investment,” Ms Jones said.

Kita, founded at the end of 2021, has been nominated for the Earthshot Prize 2023 and awarded grants from the European Space Agency and UK Research and Innovation.

Munich Re Syndicate and RenaissanceRe will also provide underwriting capacity to Kita.