Category: Carbon market insurance · Reviewed by Tim Roche, Director · PI & Commercial · Last reviewed 2026-06-10
Carbon delivery risk insurance is a specialist cover that protects buyers of forward carbon credit contracts against the financial consequences of the seller’s failure to issue and deliver the contracted volume of credits of the contracted vintage and quality by the agreed date.
Category: Carbon market insurance Also known as: Carbon non-delivery insurance, Forward carbon delivery cover, Carbon shortfall insurance Typical UK market form: Financial lines / specie hybrid, written at Lloyd’s Related concepts: Carbon credit insurance, Voluntary carbon market insurance, Reforestation insurance
Carbon delivery risk insurance, sometimes called carbon non-delivery insurance, responds where the seller of a forward carbon credit contract fails to deliver the contracted credits in whole or in part. The product is structurally analogous to non-delivery cover in commodities markets and to political risk non-honouring cover, adapted to the particularities of voluntary carbon credits issued under private standards.
It is principally relevant to two transaction shapes: pre-issuance forward contracts, where a buyer contracts for credits ahead of issuance to fund the project’s development; and offtake agreements with engineered removal projects, where the buyer agrees to acquire the entirety or a tranche of the project’s expected output over a delivery window.
Forward carbon delivery contracts are now a routine feature of the Voluntary Carbon Market. Pre-issuance financing is significant for nature-based projects developed under standards such as Verra (Verified Carbon Standard v4.7), Gold Standard for the Global Goals (v1.2), the American Carbon Registry, the Climate Action Reserve and Plan Vivo, and is essential for engineered removals developed under Puro.earth and bespoke methodologies, where capital expenditure is incurred long before credits are issued.
Integrity standards bear on delivery risk indirectly. The Integrity Council for the Voluntary Carbon Market published its Core Carbon Principles, Assessment Framework and Assessment Procedure on 29 March 2023; methodologies that fail subsequent CCP assessment may see issuance volumes reduced. The Voluntary Carbon Markets Integrity Initiative Claims Code of Practice (28 June 2023; v2 November 2024) likewise shapes buyer demand and indirectly affects seller performance.
Carbon delivery risk insurance typically responds to delivery shortfall caused by a defined list of perils. These commonly include project under-performance (for example, a planted forest area achieving lower sequestration than modelled, or a direct air capture plant achieving lower throughput than nameplate); registry delay or refusal to issue credits; insolvency of the project developer; political risk in the host jurisdiction including expropriation, export restriction and forced sale; and fraud by the project developer.
Specialist underwriters writing in this space include Kita Earth (Lloyd’s Lab Cohort 7, March 2022), CFC Underwriting (carbon credit invalidation product launched April 2023), Howden’s dedicated carbon insurance practice, and Oka (founded 2023, Beazley Smart Tracker). The product is typically written on a named-peril basis, with separate sub-limits for natural perils, registry perils, financial perils and political risk perils, and with an aggregate limit per contract.
Pricing reflects the project’s stage (pre-construction projects attract substantial loading), the methodology, the registry, the host jurisdiction, the developer’s track record and the contractual remedies available against the seller. Cover is not generally provided where the seller is unrated or where the project lacks an existing validation under a recognised standard.
Forward carbon credit contracts are commercial contracts; their status as MiFID financial instruments is the subject of fact-specific analysis under the FCA Perimeter Guidance Manual at PERG 13. The FCA’s Discussion Paper DP23/3 considered the broader regulatory perimeter as it touches voluntary carbon credits.
The UK Emissions Trading Scheme, established by the Greenhouse Gas Emissions Trading Scheme Order 2020 (SI 2020/1265), operates separately from the voluntary market. Forward allowance contracts in compliance markets have a longer-established legal and regulatory history and are generally not the subject of dedicated delivery insurance, although political risk cover does respond to some statutory and regulatory perils.
Advertising standards apply downstream of the buyer: where insurance recovery is used to procure replacement credits, the buyer must still ensure the resulting claim complies with the CMA Green Claims Code (20 September 2021), as enforced by the Advertising Standards Authority — see for example the ASA ruling against Lufthansa in December 2023 and against Etihad in October 2022.
Per-risk capacity for carbon delivery risk insurance in the London market is generally in the low to mid tens of millions of pounds for individual contracts, with co-insurance and quota-share placements increasingly common for larger offtakes. Reinsurance treaty support is the binding constraint, with European reinsurers providing most retrocession.
A UK technology company enters a ten-year offtake agreement for 50,000 tonnes a year of biochar credits issued under Puro.earth, paying in advance. Its broker places carbon delivery risk insurance with limits responding to under-performance, registry delay and developer insolvency, structured so that any insurance recovery may be used to procure replacement credits of equivalent vintage and methodology from the secondary market.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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