Chaucer announces innovative new partnership with Kita, the carbon insurance specialist, to insure the delivery risk of carbon sequestration projects.

Chaucer, the global specialty (re)insurance group, today announces a new partnership with carbon credit insurance specialist Kita to bring first of its kind insurance products to the carbon markets. Kita’s first product, Carbon Purchase Protection Cover, insures the buyer of forward purchased carbon credits against delivery risk, removing a significant protection gap.

Increased buyer trust in carbon delivery leads to greater flows of capital to help scale carbon sequestration projects at the rate necessary to fight the climate crisis. Chaucer is investing in Kita as well as providing lead underwriting capacity; follow capacity will be provided by Munich Re Syndicate and RenaissanceRe. Kita was approved as a Lloyd’s coverholder in December 2022.

Kita protects carbon credit buyers against the risk of carbon sequestration projects failing to deliver expected volumes of high-quality carbon credits. For example, a company with a high-integrity net zero strategy might forward purchase carbon removal credits in an afforestation carbon project, with the aim of enabling an environment in which young trees can grow, capturing carbon and generating biodiversity benefits. Carbon Purchase Protection Cover protects against the risk that the afforestation project doesn’t generate verified high-quality carbon credits, due to, for example:

  • Avoidable loss – e.g., the forestry project developer making an error in the planting phase
  • Unavoidable loss – e.g., natural catastrophe such as fire, wind, or other perils such as disease or pest
  • Fraud or negligence which invalidates the carbon credits prior to delivery.

Examples of a valid claim are:

  • The forest developer contracted by the landowner mis-managed their financial commitments to purchase sufficient sapling stock for a forest creation scheme. As a result, the landowner was forced to contract with a new developer to take-over the forest management. This change of developer led to a lower-than-expected carbon yield in year 6 of the project resulting in a claim.
  • Due to a shortage of forestry workers, an area of woodland surrounding a power transmission line was not cleared during the winter. The following summer, the forest suffered a higher intensity annual burn in the area leading to a biomass rather than just dead-wood loss. This resulting carbon shortfall could lead to a claim.
“Carbon sequestration projects will play a key role in the fight against climate change and Kita, alongside Chaucer, will be instrumental in enabling higher integrity in the carbon markets by safeguarding the quality and performance of carbon purchases.”
“Chaucer is delighted to partner with Kita. Providing insurance for carbon credit projects will give businesses the confidence they need to invest at scale in high quality carbon sequestration projects and meet their net zero targets.”
“We believe our partnership and investment in Kita will revolutionise the carbon credit industry and help Chaucer deliver our ESG commitments and be a genuine force for good in supporting the sustainable transition.”
Hayley Maynard
Head of Innovation at Chaucer
“We are honoured to be working alongside a (re)insurer of Chaucer’s stature, as well as Munich Re Syndicate and RenaissanceRe, to bring Carbon Purchase Protection Cover to the market. To prevent the worst impacts of climate change, we must remove gigatons of CO2 from the atmosphere annually. This is a mammoth task, and it requires de-risking and access to capital for carbon sequestration solutions. Insurance can act as a fundamental enabler - by removing risk and increasing trust in the market, insurance will help drive capital to help quality carbon projects scale. With its innovative approach to new products and strong commitment to the fight against climate change, Chaucer is the perfect partner to help Kita pursue our mission of bringing this carbon insurance to market at speed.”
Natalia Dorfman
CEO and co-founder at Kita

Published on 24.01.2023