Carbon Political Risk Cover
Insurance for Political and Host Country Risks
Political risk insurance is a long-established insurance market, geared to help businesses mitigate and manage risks arising from the adverse actions - or inactions - of governments. The aim is to provide a more stable environment in which to do business, thus enabling greater investment and scale by cushioning the impact of unpredictable and potentially sizeable losses.
Carbon Political Risk Cover is well placed to:
(i) help the carbon markets mitigate the risks associated with correspondingly adjusted credits; and
(ii) protect anyone investing in/operating in politically-uncertain environments
Why buy Carbon Political Risk Cover?
What does Kita’s CPRC cover:
Comprehensive insurance to protect against broad political and Article 6 uncertainties
Bespoke protection for cross-border investment: both pre- & post-issuance.
Worldwide coverage, excluding territories subject to international sanctions.
Why invest in CPRC:
To mitigate the impacts of increasing political volatility and Article 6 immaturity risk, which could undermine investments.
To introduce a creditworthy wrapper, providing a backstop against loss.
To enable proactive strategies to derisk investment rationale.
Opportunities of incorporating political risk insurance into carbon markets:
Traditional PRI cover is also relevant to carbon markets and translates well to carbon projects.
Political risk insurers will already be comfortable with many of the countries in which carbon projects are based.
“Breach of contract” works well for the specific risk in question where carbon credits that are not correspondingly-adjusted will be compensated, as the underlying reason for this lack of corresponding adjustment is likely to stem from a host country’s failure to comply with the rules of the Letter of Authorisation (LoA) and wider terms of the investment agreement (the “Project Development Agreement”).
Working with carbon insurance specialists such as Kita, it is possible to bridge the information and understanding gap between PRI and carbon markets.
Carbon Political Risk Cover — What do we cover? What do we assess?
What do we cover?
Confiscation/Nationalisation
Carbon credit export ban
Revocation or dispute over carbon rights
Revocation of LoA (Letter of Authorisation/Approval)
Revocation of Corresponding Adjustment
Political Violence
Forced Abandonment
What do we assess?
Project’s LoA and investment contract
Traditional political risk
Host country carbon credits and emissions
NDC documentation
Article 6.2 context
