Global insurance broker Howden’s carbon capture and storage insurance facility aims to unlock crucial investment to support the global transition to net zero and is the second innovative solution from the firm designed to support the growth of the carbon market.
This first-of-its-kind insurance facility provides cover for the sudden or gradual leakage of carbon dioxide from commercial-scale carbon capture and storage (CCS) facilities into the air, land and water.
Designed by Howden and led by French reinsurer SCOR’s syndicate at Lloyd’s, other following markets within the specialist Lloyd’s insurance and reinsurance marketplace have committed to support the facility, with further capacity anticipated to meet commercial demand globally, says the broker.
According to Howden, the new solution addresses a key risk associated with CCS technology and supports the development of a commercial insurance market for leakage risk.
The product is led by Glenn O’Halloran, Executive Director, Howden Climate Risk & Resilience, and further emphasises the company’s commitment and important role in the design and deployment of innovative insurance structures that support decarbonisation.
This new insurance facility follows Howden’s launch of a carbon credit invalidation insurance solution to increase confidence in the Voluntary Carbon Market (VCM) in 2022.
As noted by the re/insurance broker, the financial viability of CCS projects often relies on revenue from the voluntary and compliance carbon markets, and this new form of insurance covers liabilities arising from carbon credits and allowances, including UK and EU ETS liabilities.
The firm states that the global carbon capture and sequestration market is projected to reach a value of $7.49 billion by 2030 at a compound annual growth rate of 19.9% between 2023 and 2030.
Howden says that its new facility will “de-risk projects critical to the decarbonisation of the global economy” through the offering of balance sheet protection via structured risk transfer solutions.
Rowan Douglas CBE, CEO, Howden Climate Risk and Resilience, commented: “This breakthrough shows how insurance helps unlock vital finance to drive the net zero transition at the scope and speed required. By improving the bankability of critical CCS projects, we are establishing insurance as a force for good and building on the work being done by the Sustainable Markets Initiative (SMI) to realise the potential of engineered carbon removal solutions and move this nascent sector into the mainstream.”
“This new insurance facility is an example of what can be achieved when innovative minds join forces to support climate positive solutions in our market. Developed at Lloyd’s, in partnership with The Insurance Task Force of the Sustainable Market’s Initiative, we hope together we can spark more cross-sector collaboration that will enhance our resilience against the climate crisis,” said John Neal, CEO, Lloyd’s and Chair of the Sustainable Markets Initiative Insurance Task Force.
Romain Launay, CEO, SCOR Specialty Insurance and Marie Biggas, CUO, SCOR Syndicate, added: “We are delighted to lead this facility, which is evidence of the innovative risk transfer solutions that can be brought to market when the best minds across the industry work together to de-risk the global energy transition.
“Furthermore, it fully supports SCOR’s target to multiply insurance and facultative reinsurance coverage for low carbon energy by 3.5 by 2030. We look forward to working with Howden and the market to boost investor and lender confidence in CCS projects.”
