New report: Are carbon credits the next billion-dollar insurance market?
Oxbow Partners and Kita today launch a new landmark report entitled “Gross Written Carbon: Are carbon credits the next billion-dollar insurance market?”
The report includes:
The scale of the opportunity setting out how the carbon credit insurance market could reach $1bn by 2030 and $10-30bn by 2050, whilst also highlighting the challenges that must be overcome for carbon insurance to “become the next cyber”.
Perspectives from the leading industry experts including interviews with brokers (Aon, Howden & Marsh) and (re)insurers (AXA XL, CFC, Chaucer & Fidelis) who highlight what they perceive to be an exciting new opportunity. They argue that the explosive growth of the currently nascent market, despite its recent challenges, is a question of “when, not if.”
Background on the carbon market and its purpose of managing and mitigating emissions and driving finance towards carbon projects, distinguishing between the compliance and voluntary carbon markets.
The four key benefits that insurance brings to the carbon markets: (1) A balance between traditional risk management practices and innovation; (2) a stamp of confidence; (3) a detailed assessment of carbon project risk; and (4) encouragement for market participants to take necessary risks.
Overview of the current carbon credit insurance landscape highlighting some of the insurers who already have an offering and their product suite.
The report, co-authored with specialist insurance management consultancy, Oxbow Partners, and carbon insurance company, Kita, is a comprehensive guide to the potential of the carbon market as well as providing detailed and aggregated insights for experts in the field.
Insurance has a critical role to play in supporting the carbon market as the world continues its decarbonisation journey to tackle climate change.
The report estimates the total addressable market for carbon credit insurance to be around $1bn of annual Gross Written Premium (GWP) in 2030, rising to $10-30bn GWP by 2050. The forecast may even underestimate the potential scale of the market; for example, the calculations are solely based on the voluntary carbon market (VCM) even though the VCM and compliance markets are expected to converge, which would significantly increase the market size.
Miqdaad Versi, Head of the Sustainability Practice at Oxbow Partners, was upbeat about the potential for insurance: “The carbon credit insurance market is an exciting opportunity for those looking for an avenue to be green with integrity and make a profit. The acceleration in the market is inevitable if the world is going to decarbonise. With new capacity providers already entering in 2024, the future looks bright.”
James Kench, Head of Insurance at Kita, said: “The insurance market is on the front line for climate risk and is uniquely placed to help business and society navigate through increasingly uncertain times. This report is a call to action for the insurance industry to embrace a vast new carbon risk pool with purpose.”
About Oxbow Partners: Oxbow Partners is a specialist management consultancy exclusively serving the insurance industry. Its clients include leadership teams at the world’s leading insurers, reinsurers, brokers and private equity firms. Its consulting engagements span growth, operations, technology and M&A, and has a specific expertise in Sustainability across the insurance sector.
About Kita: Kita is the carbon insurance specialist, developing bespoke carbon insurance products that safeguard the quality and performance of carbon transactions. By reducing risk, carbon insurance channels investment towards high-quality carbon projects, enabling them to scale at the pace needed to address the climate crisis. Kita is a coverholder at Lloyd’s of London, the world’s specialist insurance and reinsurance market, underwritten by Chaucer Group, Munich Re and Renaissance Re.