Tokio Marine Kiln has partnered with Kita to develop political risk insurance for developers of, and investors in, carbon credits projects.

Led by Ed Parker, head of special risks at TMK, the product will insure project developers and their investors against risks including confiscation, nationalisation, forced abandonment, licence 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.

“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,” Parker said. “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, added: "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.

Amid widespread and rising political volatility, carbon credit projects are at increasing risk from geopolitical developments that impact their ability to sell credits.

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