Howden provides the first insurance against fraud in voluntary carbon markets

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  • Insurance covers third party fraud, negligence
  • Move wants to help disrupt corporate businesses
  • Cover has been given to Respira for many of the projects

LONDON, Sept 6 (Reuters) – Broker Howden Group said it has helped create the world’s first insurance against fraud and negligence in voluntary carbon markets, part of an effort to expand the emerging business.

Carbon credit – which comes from practices such as planting trees and maintaining biodiversity to offset carbon emissions – is seen as an important part of the country’s plan to reduce global warming.

Carbon credits were about $2 billion in 2021, but advisors McKinsey provides it could be worth more than $50 billion a year by 2030, as companies and countries look to reduce their emissions on the road to zero.

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However, with an unregulated market and amid concerns about the quality of loans being sold, many companies are reluctant to spend millions of dollars on loans for fear of being misled.

In order to support the growth of the company, Mr. Howden – who manages more than $ 10 billion – said that he agreed with the carbon finance company Respira International and reinsurance investor Nephila Capital to pay third-party fees and fraud, reducing the known risk of buying carbon credits.

“If I’m a big shampoo buyer and I’ve told every shampoo buyer in Europe that I’m going to be zero and it seems that half of the credits I’ve bought are not worth the paper they’ve written on because. I’ve been lied to, it hurts me a lot,” Charlie Langdale, head of climate risk at Howden, told Reuters .

In the 2000s, the voluntary carbon market was rocked by a series of scandals where fraudulent traders offered credits related to land they did not own and human activities were mis-sold at inflated prices in the boiler-room. gossip.

The British Supreme Court in 2016 issued a final order to 19 companies that participated in the scheme that led to the sale of more than 5 million loans to the public for more than 36 million pounds ($41 million).

Traditionally, insurers have been unable to provide cover for the liabilities associated with such projects, due to the lack of information on the history of losses and the fact that many projects are located in countries with weak and ineffective laws in case of problems.

To help launch the market, Mr Howden and his colleagues said they gathered a proven track record that was reviewed by Respira and offered insurance as a bundled unit, thus dissipating the insurance risk.

In the event of fraud or negligence after the loan has been sold, Respira can call the insurance company and pay the buyer.

Respira’s portfolio insurance was led by Nephila’s Lloyd’s of London-based Syndicate 2357, along with other Lloyd’s insurers and Zurich Insurance Group ( ZURN.S ), Langdale said.

As the market matures, and insurers become more comfortable with risk pricing, the focus in the coming months will be for large companies with diverse portfolios to acquire their own insurance.

Ana Haurie, co-founder and CEO of Respira, said the insurance backed by its loans will provide comfort to buyers of carbon credits.

“It proves that these are good projects if you can get them insured.”

($1 = 0.8693 pounds)

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Edited by David Evans

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