The insurance industry expects carbon offset cover to be a fast-growing insurance category as more companies commit to tree planting initiatives, according to research from Chaucer.
Some 24% of FTSE 100 companies say they are now investing in tree planting programmes with the specific objective of offsetting carbon emissions, whilst 27% are sequestering carbon or increasing biodiversity more generally, as part of their ESG strategy.

A separate study from the International Emissions Trading Association found that between 2012 and 2022, businesses invested more than £28bn in carbon credit projects. Over 80% of capital raised for this since 2020 has been targeted towards nature-based projects such as tree planting.

Natural disasters, disease and pests can cause significant damage to carbon offset investments. Examples of recent forest fires that have created substantial losses include a fire in 2022 in Aragon, Spain, which destroyed 14,000 hectares of trees planted to store carbon; and the destruction in 2021 of 61,916 hectares of ‘offset forest’ burned down in California.

Hayley Maynard, Chaucer’s head of innovation, commented: “Businesses are now investing considerable amounts in tree-planting projects, offsetting their carbon emissions in an attempt to tackle climate change.

“These initiatives can cost millions to set up and maintain, take a long time to become established and represent significant investments of both time and money. Appropriate insurance coverage can safeguard both.

“If we want more businesses to invest in tree-planting and carbon-capture projects, we must help them make the investment without fearing risks beyond their control.”

Chaucer has partnered with Kita, the carbon insurance specialist, to insure the delivery risk of carbon capture projects, enabling higher integrity in the carbon markets. With this Carbon Purchase Protection Cover, businesses engaged in carbon credit projects like tree planting can protect themselves and their investments from threats to these projects.

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