Global insurance group Howden has announced a first-of-its-kind insurance facility covering the leakage of carbon dioxide (CO2) from commercial-scale carbon capture and storage (CCS) facilities. This product will unlock vital investment to support the global transition to net zero.

The insurance facility, designed by Howden and led by the SCOR Syndicate, provides cover for environmental damage and loss of revenue arising from the sudden or gradual leakage of CO2 from CCS projects into the air, land and water. The solution addresses a key risk associated with CCS technology and supports the development of a commercial insurance market for leakage risk, the need for which has been highlighted by the UK Government Department for Energy Security & Net Zero’s Business Model for Carbon Capture, Usage and Storage.^[1]

Other following markets within Lloyd’s have committed to support the facility, with further capacity anticipated to meet commercial demand globally. Led by Glenn O’Halloran, Executive Director, Howden Climate Risk & Resilience, this product further emphasises Howden’s leading position in the design and deployment of unique insurance structures that support decarbonisation.

The financial viability of CCS projects often relies on revenue from the voluntary and compliance carbon markets. This new form of insurance covers liabilities arising from carbon credits and allowances, including UK and EU ETS liabilities. This is the second innovative solution from Howden to support the growth of the global carbon market; in 2022, Howden launched the world’s first carbon credit invalidation insurance solution.

The global carbon capture and sequestration market is projected to reach a value of USD 7.49 billion by 2030 at a compound annual growth rate of 19.9% between 2023 and 2030^[2], accelerating the need for effective insurance solutions to protect the financial viability and stability of CCS projects.

Howden’s facility will de-risk projects critical to the decarbonisation of the global economy by offering balance sheet protection through structured risk transfer solutions.

Rowan Douglas CBE, CEO, Howden Climate Risk and Resilience said: “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)^[3] 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 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 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.”
 

Footnotes:

^[1] Department for Energy Security and Net Zero, Carbon Capture, Usage and Storage: An update on the business model for Transport & Storage

^[2] Vantage Market Research, Carbon Capture And Sequestration Market Size, Share & Trends Analysis Report by 2030

^[3] The Sustainable Markets Initiative