The first-of-its-kind facility has SCOR as lead underwriter and other following markets at Lloyd’s have committed to support the facility, with further capacity anticipated, according to Howden.
Howden has announced a first-of-its-kind insurance facility at Lloyd’s, with SCOR as lead underwriter, covering the leakage of carbon dioxide from commercial-scale carbon capture and storage (CCS) facilities.
Howden said it would be led by Glenn O’Halloran, executive director, Howden Climate Risk & Resilience.
The initiative will unlock vital investment to support the global transition to net zero, Howden said.
The insurance facility, designed by Howden and led by SCOR’s syndicate at Lloyd’s, 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.
“This breakthrough shows how insurance helps unlock vital finance to drive the net zero transition at the scope and speed required,” said Rowan Douglas (pictured), CEO, Howden Climate Risk and Resilience.
“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,” Douglas said.
The solution addresses a key risk associated with CCS technology and supports the development of a commercial insurance market for leakage risk,
This need, Howden noted, has been highlighted by the UK Government Department for Energy Security & Net Zero’s Business Model for Carbon Capture, Usage and Storage.
The financial viability of CCS projects often relies on revenue from the voluntary and compliance carbon markets.
Marie Biggas, CUO and active underwriter of SCOR Syndicate and SCOR UK, commented: “Sustainability is at the core of our business strategy.
“It’s through the combination of creativity and technical expertise that we continue to be a leader in this space in order to support our partners in meeting their ESG ambitions. It truly is a testament to the reputation and vision of Ollie and his team that this consortium has come to fruition.”
Rebekah Clement, corporate affairs director, Lloyd’s, said: “This consortium is a great example of how Lloyd’s is collaborating to insure the transition – combining the expertise, foresight and innovation our market is known for to protect the investments and progress being made to build a more sustainable future.”
This new form of insurance covers liabilities arising from carbon credits and allowances, including UK and EU ETS liabilities. This is the second innovative project from Howden to support the growth of the global carbon market; in 2022, the broker launched the world’s first carbon credit invalidation insurance solution.
The global carbon capture and sequestration market is projected to reach a value of $7.49bn by 2030 at a compound annual growth rate of 19.9% between 2023 and 2030, 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, the broker said.
John Neal, CEO of Lloyd’s, and chair of the Sustainable Markets Initiative Insurance Task Force, also commented.
“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,” Neal said.
“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,” he added.