Key Question
What happens if a carbon project underperforms against forecasts?

Detail
Under/non-delivery could occur due to a number of reasons including unavoidable losses (e.g. natural catastrophe); avoidable losses (e.g. abandonment & insolvency or fraud & negligence); or carbon losses (change in methodology or insolvency of the standard).

Who might need this cover
Those investing into a project and seeking a return on investment (cash or carbon credits).

Buyers who are pre-purchasing carbon credits (ex-ante) and are waiting upon their delivery.

Project Developers who must deliver credits to meet a pay-on-delivery contract.

Key Question
Are you concerned about a reversal occurring after a credit has been issued?

Detail
Reversals can happen across all types of carbon. For example nature-based solutions could face natural catastrophe, and engineered solutions could suffer leakage of carbon stored underground. Project developers might be required to make good this reversal, Carbon Standards might suffer losses from their buffer, and end users might question the integrity of their claims.

How can Kita help
We can provide risk management solutions for Carbon Standards who may be concerned about the impact of a significant reversal on their buffer pool, or who wish to provide solutions for Project Developers for managing their own reversal risk.

Key Question
Do you rely on other parties as part of this transaction? Are you concerned about their actions?

Detail
This risk can be broken down into three segments: Implementation, Financial and Contractual.

Implementation (abandonment, fraud, negligence, non-delivery of credits)

Financial (non-payment on delivery, insolvency)

Contractual (breach of contract)

Who might need this cover
Investors, buyers, and intermediaries will rely on a counterparty to receive their credits. Likewise, a project developer may rely on a counterparty to successfully implement their project. Insurance can help mitigate these counterparty risks.

Key Question
Are you concerned that a future event will lead to the invalidation of the project?

Detail
For example, the project is invalidated due to a fraudulent or negligent act, a significant reversal of carbon dioxide back into the atmosphere or a significant shift in methodology.

How Kita can help
Kita can advise on these risks within different projects - stemming from wider counterparty and reversal considerations - and guide clients towards appropriate risk mitigation solutions.

Key Question
Are you concerned about changes to law or regulation at an international/governmental/national/subnational level which might result in a loss of of your carbon credits?

Detail
This may relate to traditional political risks, such as war or terror, or carbon related risks, in particular for Article 6 markets.

Who might need this cover
This has the potential to impact all parties within the carbon markets.

Key question
Are you worried about your price exposure to carbon, particularly how you might be required to replace credits lost with higher priced credits in the future?

Detail
For companies that trade or invest in carbon credits, market prices can be turbulent. For companies that use carbon credits to meet net zero targets, price poses a wider risk. If a corporate is forced to replace carbon credits due to invalidation, it takes on a potentially uncapped future liability by being forced to replace those credits at unknown future prices.

How Kita can help
Kita does not insure price risk directly, however our insurance products can help to cap your exposure to these risks to enable more certainty in financial management.