London, July 15 2024 - Tokio Marine Kiln (TMK), a leading international insurer, today announces it has partnered with Kita, a pioneer in carbon credit insurance, to provide Political Risk insurance for developers of, and investors in, carbon credits projects. TMK is among the first to implement this type of policy in the Lloyd’s market, and the new cover will enable these projects to mitigate the financial risk of political instability to their ability to sell and export credits.

Led by Ed Parker, Head of Special Risks at TMK, the product will insure project developers and their investors against risks such as confiscation, nationalisation, forced abandonment, license cancellation and political violence. It will cover losses for both parties should a project’s host country revoke agreements that enable the credits to count towards external offsetting strategies.

With rising political volatility in many regions, carbon credit projects are at increasing risk from geopolitical developments that impact their ability to sell credits. This new product is intended to mitigate these evolving risks, providing much needed certainty for investors and engender confidence in the voluntary carbon market. The availability of cover will also increase the viability of new projects and enable new, high-quality projects to proceed, with the rigorous assessment provided by Kita and TMK, affording an added layer of reassurance to investors.

Ed Parker, Head of Special Risks at TMK, said:

“We are at a critical juncture when it comes to offsetting strategies. They could not be more vital as the world tries to move at pace towards net zero, but increasing political instability is impacting projects designed to produce carbon credits. This issue is even more pertinent now as so many industries are facing increasing regulation around their offsetting and developers simply cannot afford to keep investing in the creation and maintenance of projects if they won’t be able to sell the credits when they  are revoked. Our partnership with Kita will provide much-needed security against these risks and make the development of carbon projects more sustainable long-term.”

James Kench, Head of Insurance at Kita, said:

"Political uncertainty in the carbon markets is holding back necessary financing of high-quality projects. Political Risk insurance has the potential to significantly mitigate the risks associated with correspondingly adjusted credits and protect anyone investing or operating in politically uncertain environments.

In collaboration with TMK, Kita's new Carbon Political Risk Cover provides protection against traditional political risk and contract frustration perils, as well as bespoke coverage for carbon delivery failure. For example, should a host country either revoke a project’s Article 6 authorisation or fail to apply a corresponding adjustment as promised, insurance would cover the costs and prevent wider financial impact that may inhibit progression of the project and its success.

Working with TMK to deliver this essential cover will help to unlock more investment into the voluntary carbon market to drive climate action now."

ENDS