Howden has developed a carbon credit insurance solution for the Voluntary Carbon Market (VCM), saying it is critical that independently-verified, high-quality credits be differentiated from unverified credits.

It is the first of its kind for the VCM as Howden works on a suite of products to support global net zero emission targets.

“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,” Group CEO David Howden said.

The product will give buyers and sellers greater certainty and create a “very welcome layer of security,” Howden says, and is wrapped around books of independently-verified quality carbon credits, providing cover for third-party negligence and fraud.

It is targeted at corporates and financial services companies who want to purchase genuine carbon credits. It will also aid carbon projects keen to provide credit buyers with top assurance, and channel capital into higher-quality carbon projects.

VCM turnover hit almost $US2 billion ($2.97 billion)) last year as 60% of Fortune 500 companies set climate targets. Howden says there is “no doubt” the VCM will play a vital role in the transition to a low-carbon future, and estimates suggest it that could be worth $US20-50 billion ($30-74 billion) by 2030.

Howden developed the solution with carbon finance firm Respira International and Nephila Capital, an investment manager specialising in reinsurance risk, with advice from climate risk finance firm Parhelion and support from the Insurance Task Force of the Sustainable Markets Initiative.

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

Howden Head of Climate Risk and Resilience Charlie Langdale says to meet that top VCM growth estimates, 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 and reputable bodies, will help buyers to purchase with confidence and should drive more buyers towards high-quality projects,” he said.