Howden, a global insurance intermediary group, has announced the placement of the first Carbon Credits Warranty and Indemnity (W&I) insurance policy.
The W&I policy provided insurance cover on the sale of carbon credits for the reafforestation project of degraded forest lands by Mere Plantations, a UK-based company that owns and operates a teak plantation in Ghana, West Africa, and has been underwritten by a leading managing general agent.
This is an important milestone in the evolution of the voluntary carbon market. The presence of a Carbon Credits W&I policy dramatically improves trust in the quality of carbon credits and has the potential to unlock a wave of capital into the carbon market.
The demand for high-quality credits is strong, and by using insurance as a governance mechanism, the W&I policy significantly increases the integrity and value of the carbon credits. Mere Plantations can demonstrate to buyers that their credits have met the highest levels of environmental, social and financial diligence, and are backed by an insurance policy that guarantees their provenance.
This insurance policy allows project developers to access the underwriting expertise of the M&A insurance market, providing assurance in the methodology and implementation of their carbon credit projects.
Recognising the value of this protection, and the high quality of the credits, buyers are purchasing the credits at a premium compared to other reafforestation projects currently offered in the market. Uniserve, a UK-based logistics company, is the first company to buy these credits.
This announcement follows other Howden-led initiatives in the carbon space, including the first voluntary carbon credit insurance product to market in 2022 and the introduction of an insurance product that covers the leakage of carbon dioxide from commercial-scale carbon capture and storage facilities, announced in January 2024.