A collaborative report, titled Are carbon credits the next billion-dollar insurance market?, from Oxbow Partners and Kita anticipates significant growth in the carbon credit insurance market, estimating insurance premiums to reach approximately $1 billion by 2030 and a substantial $10–$30 billion by 2050.
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The study underscores the vital role of insurance in supporting the carbon market amid global environmental efforts. It outlines four key benefits of insurance in the carbon credit market, including facilitating access to finance, providing confidence, assessing project risk, and encouraging risk-taking.
Industry leaders, such as Aon, Howden, Marsh, AXA XL, CFC, Chaucer, and Fidelis, express optimism, viewing the explosive growth of carbon credit insurance as inevitable. Miqdaad Versi of Oxbow Partners highlights its significance in promoting green initiatives with profitability. James Kench, the Head of Insurance at Kita, noted, ‘The insurance market is on the front line for climate risk and is uniquely placed to help business and society navigate through increasingly uncertain times. This report is a call to action for the insurance industry to embrace a vast new carbon risk pool with purpose.
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The report projects the total addressable market for carbon credit insurance to hit $1 billion in annual Gross Written Premium (GWP) by 2030, with a potential surge to $10–30 billion GWP by 2050. However, this estimate may underestimate the market’s true potential, focusing solely on the verified (voluntary) carbon market (VCM) and excluding the compliance market.
In 2023, global Compliance Carbon Markets exceeded $800 billion, with the VCM valued at $2 billion in 2022. Predictions by Barclays suggest VCM growth to $250 billion by 2030, with the market expected to grow at least 5x, potentially exceeding a trillion dollars by 2050.
The Voluntary Carbon Market (VCM) mainly focuses on credits from carbon dioxide removal (CDR) projects. McKinsey projects the CDR market to reach $40–$80 billion by 2030, with the scaling of the CDR industry, overlapping with the VCM, expected to boost market growth. Anticipating the convergence of the VCM and compliance carbon markets, a significant market expansion is expected.
Read more: Bullish growth projections in the carbon market
The report emphasises the broad insurance needs in the carbon market sector, covering specialised insurance for carbon credits and traditional lines for carbon projects. While long-term prospects are optimistic, the report's conservative approach in estimating market potential opens discussions about regulatory impacts and additional investment considerations.
Despite the complex and evolving nature of carbon markets, the presence of insurance is deemed essential for exponential growth. The introduction of insurance mechanisms is seen as a catalyst to address risks, boost investor confidence, and drive increased investment, aligning with global emission reduction targets.
DGB Group is a leading carbon project developer at the forefront of leveraging the carbon market to restore nature. With our expertise and top-quality carbon credits (carbon units), we are ideally positioned for growth and impact. We offer individuals, investors, and organisations of all sizes the opportunity to benefit from the burgeoning carbon market and to benefit from nature-based solutions.
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