The re/insurance broker said its insurance solution to support energy transition is the first of its kind.

Aon has announced that it has developed a new insurance product designed specifically for international transport and storage companies that are engaged in storing carbon dioxide.

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The new product is aimed at providing cover for key risk exposures associated with Carbon Capture and Storage (CCS) and advances the role of insurance in de-risking global CCS projects.

This, in turn, opens up access to capital providers and investors, Aon said, addressing a protection gap for these developments, and changing the perception of what is insurable.

“Carbon capture is a fundamental component in reducing emissions and supporting the energy transition,” said William Lynch, business leader for natural resources at Aon.

“While challenges remain, this is a first-of-its-kind risk transfer solution, aimed at providing comprehensive cover under an agreed policy wording, for transport and storage companies engaged in CCS,” Lynch said.

Carbon Capture Utilisation and Storage addresses aspects of environmental, social, and governance (ESG), Aon said, by reducing carbon emissions and allowing energy and other emitting industries to meet their net zero goals and objectives.

Aon’s energy transition product was developed through its role as insurance broker to Eni UK, the lead company in a consortium delivering the low carbon and hydrogen HyNet North West project, in which Eni is the transportation and storage operator), and the Northern Endurance Partnership (NEP), consisting of BP, Equinor, and Total Energies.

This project is among the first large commercial-scale and complete carbon transportation and sequestration processes for capturing, removing and storing industrial carbon dioxide emissions.

Aon described this as key to the decarbonisation of the UK’s industrial heartland.

The product has been developed acknowledging energy regulators and stakeholder expectations and in support of the assessment of available insurance coverage, initially created in conjunction with a UK project, but designed to work for projects globally.

Aon’s multi-component CCS solution has the following key features, the broker emphasised:

  • · Sufficient capacity for physical risks, loss of revenue and general liabilities for large-scale projects;
  • · Newly created and bespoke coverage that responds to issues with storage reservoir integrity, including loss of revenue;
  • · Indemnity for loss of tax credits or requirements to purchase carbon credits associated with a leak of CO₂ from the carbon storage facility; and
  • · Placement with A- or higher-rated insurers, predominantly in the London market.

“Cover spans the construction and repurposing of existing assets as well as the operational phase. A huge benefit for operators and their investors, as well as their customers, is knowing what their insurance costs and coverage will be in an otherwise uncertain market,” Lynch said.

“Aon has spearheaded the development of this product over the last 18 months, working in collaboration with leading underwriters, and the legal community and we look forward to working on many similar projects,” he added.