Category: Carbon market insurance · Reviewed by Mark Fox, Broker · Renewals · Last reviewed 2026-06-10
Sequestration insurance is a class of specialist cover that responds to the loss or reversal of carbon that has been sequestered by a project — whether biologically through vegetation and soils, geologically through CO2 storage, or chemically through engineered processes — over the project’s defined permanence period.
Category: Carbon market insurance Also known as: Carbon sequestration insurance, Sequestration reversal cover, Carbon storage insurance Typical UK market form: Specie / parametric hybrid; some captive-led structures for buffer pool support Related concepts: Reforestation insurance, Blue carbon insurance, Carbon credit insurance
Sequestration insurance is the cover that responds to the reversal of sequestered carbon over the permanence period associated with the relevant methodology. Permanence — the requirement that sequestered carbon remain stored for a defined period — is foundational to crediting; sequestration insurance is the financial backstop that protects project developers, credit buyers and registry buffer pools against the financial consequences of reversal events.
The product covers a wide range of sequestration types: forestry, peatland and wetland restoration, soil carbon, blue carbon (mangroves, salt marshes, seagrass), biochar, enhanced rock weathering, and carbon dioxide capture with geological storage. Each carries its own peril profile and its own science of permanence, with policy wordings reflecting those differences.
Most sequestration projects are credited under voluntary standards. Verra (Verified Carbon Standard v4.7) operates methodologies for forestry, agriculture and other land use, and a buffer pool to absorb reversal risk; Gold Standard for the Global Goals (v1.2) operates a comparable model; the American Carbon Registry, Climate Action Reserve and Plan Vivo each issue sequestration credits; and Puro.earth focuses on durable engineered removals. Compliance markets use sequestration credits more sparingly, with California’s cap-and-trade compliance offsets, Australia’s Carbon Farming Initiative and Canada’s federal offset system as the principal precedents.
The Integrity Council for the Voluntary Carbon Market published its Core Carbon Principles, Assessment Framework and Assessment Procedure on 29 March 2023, and the Voluntary Carbon Markets Integrity Initiative its Claims Code of Practice on 28 June 2023 (with v2 in November 2024). Both shape demand for sequestration credits and indirectly the underwriting of sequestration insurance.
Sequestration insurance typically covers reversal arising from natural perils (fire, drought, pest, disease, storm) and from human perils (illegal logging, change of land use, encroachment). Engineered storage projects attract distinct peril sets — leakage from a geological storage formation, failure of the injection well, seismic activity — and are commonly written under specialist energy and engineering wordings adapted to the carbon market context.
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). Some buffer pool structures are now supported by parametric reversal cover triggered by satellite-observed forest loss or by direct sensor data from engineered storage facilities; others are supported by treaty reinsurance into Bermuda and continental Europe.
Cover periods are generally aligned with the methodology’s permanence horizon, which can extend to 40 or 100 years depending on methodology. Where the period exceeds traditional insurance horizons, cover is typically written on a renewable basis with developer obligations to maintain cover throughout permanence.
Sequestration projects in the United Kingdom are increasingly material. The Woodland Carbon Code (managed by Scottish Forestry on behalf of the four UK administrations, established 2011) and the Peatland Code (managed by IUCN UK Peatland Programme, established 2015) are the principal domestic UK sequestration standards. Issued units (Woodland Carbon Units, Peatland Carbon Units) are listed on the UK Land Carbon Registry. The UK Emissions Trading Scheme, established by the Greenhouse Gas Emissions Trading Scheme Order 2020 (SI 2020/1265), does not currently accept these units for compliance but consultations have considered integration.
UK carbon capture, usage and storage (CCUS) is regulated under the Energy Act 2008 (Chapter 3 of Part 1, storage licensing) and the Energy Act 2023, which established the economic regulation framework for transport and storage operators. Sequestration insurance for UK CCUS projects sits within the broader project finance and operational risk programme.
Communication of sequestration outcomes is policed under the Competition and Markets Authority Green Claims Code (20 September 2021); claims about “removal” or “sequestration” must distinguish gross from net and must reflect any reversal exposure.
Capacity for biological sequestration cover in the London market is typically in the low to mid tens of millions of pounds per project, with capacity for engineered geological storage materially higher given its alignment with the established energy insurance market. Reinsurance treaty support remains the binding constraint for biological perils.
A UK afforestation project issues Woodland Carbon Units under the Woodland Carbon Code with a 100-year permanence obligation. Its broker places sequestration insurance to support the developer’s contribution to the registry’s risk buffer, with the policy responding to fire, windthrow, pest and disease losses exceeding a defined excess, structured to support the developer’s obligations to the registry and to its credit buyers.
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.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
Get a quote