The move is poised to invigorate investments crucial for steering the world towards a net-zero carbon future, marking Howden’s second groundbreaking solution tailored to fortify the burgeoning carbon market.
The newly unveiled insurance mechanism extends coverage for potential carbon dioxide leaks, whether sudden or gradual, emanating from large-scale carbon capture and storage (CCS) facilities, impacting air, land, and water. Crafted by Howden and spearheaded by SCOR’s syndicate at Lloyd’s, several other Lloyd’s marketplace participants have pledged their support for the initiative, with additional capacity anticipated to meet global commercial demand, as per the broker’s statement.
Addressing a critical risk inherent in CCS technology, the product fosters the evolution of a commercial insurance framework to mitigate leakage risks. Glenn O’Halloran, Executive Director of Howden Climate Risk & Resilience, leads the initiative, underscoring the company’s dedication and pivotal role in devising and implementing innovative insurance architectures that facilitate decarbonization.
This latest insurance offering follows Howden’s introduction of a carbon credit invalidation insurance solution in 2022, aimed at enhancing confidence in the Voluntary Carbon Market (VCM). Notably, CCS project viability often hinges on revenue from both voluntary and compliance carbon markets, and the new insurance form extends coverage for liabilities stemming from carbon credits and allowances, including those within the UK and EU Emissions Trading Systems (ETS).
According to industry insights cited by the re/insurance broker, the global carbon capture and sequestration market is forecasted to surge to $7.49 billion by 2030, exhibiting a robust compound annual growth rate of 19.9% between 2023 and 2030. Howden asserts that its latest facility will “de-risk projects critical to the decarbonization of the global economy” by furnishing balance sheet protection through structured risk transfer solutions.
Speaking about the move, 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.”
John Neal, CEO, Lloyd’s and Chair of the Sustainable Markets Initiative Insurance Task Force, also said: 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.”
Romain Launay, CEO, SCOR Specialty Insurance and Marie Biggas, CUO, SCOR Syndicate, commneted, saying: “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.
Launay added: “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.”
