The insurability of carbon management projects is the focus of a new joint paper. The Oil and Gas Climate Initiative (OGCI), the Geneva Association (GA) and the Clean Energy Ministerial CCUS Initiative (CEM CCUS) have published a joint paper, Enhancing the Insurability of Carbon Management Projects, according to the announcement. The paper covers four guiding tenets and additional workshop insights to strengthen risk allocation frameworks, enhance insurability, support project bankability and accelerate the scale-up of carbon capture and storage (CCS).
A Multi-Year Dialogue Behind the Paper
The Geneva Association hosts the announcement as a press release on its website, and the paper itself is published there as a PDF. In its announcement, the Geneva Association said the paper draws on a multi-year dialogue across industry, government and the insurance sector centered on CCS value chains. The announcement uses the term CCS value chains for the subject of that dialogue.
The announcement also reports on a discussion of the paper. It states that the paper was discussed during a session at the Clean Energy Ministerial in Riyadh. InsuraBeat has separate coverage of financial fragmentation and reinsurance capital.
What the Tenets Say on Collaboration, Regulation and Risk Allocation
In the paper itself, each tenet is introduced by a short headline statement. The paper numbers its tenets, and the numbering is kept in this list. The headline statements on collaboration and regulation carry the lower numbers, and those on value chain assessment and risk allocation carry the higher ones.
- Tenet 1. Cross-sectoral collaboration enables scale
- Tenet 2. Clear regulation builds confidence
- Tenet 3. Whole value chain assessment can improve insurability and risk allocation
- Tenet 4. Clear risk allocation frameworks can accelerate project development
The paper and the announcement both use the term risk allocation frameworks. The paper also explains what the tenets are meant to do. It states that the objective of developing these tenets is not to seek to maximize insurance coverage, but to build trust amongst stakeholders.
On risk allocation, the paper says: “Not all CCS risks are insurable, and effective deployment depends on allocating risks to the parties best positioned to manage them through operational controls, contractual arrangements, insurance solutions or public policy support.”
The paper also states: “No single stakeholder can address the challenges associated with scaling up alone.”
Workshop Insights on Data, Post-Injection Duties and Public Policy
The paper also lists workshop insights, which are worded as follows.
- Workshop Insight: Shared data can reduce cost and improve risk assessment
- Workshop Insight: Post-injection requirements need early clarity
- Workshop Insight: Targeted public policy measures can bridge early gaps
The announcement and the paper both use the term post-injection in connection with requirements and responsibilities. The announcement carries statements on data, stewardship and public policy. On data, it states: “Improved data sharing can help strengthen understanding of risk and support market development.”
On stewardship, the announcement states: “Early clarity on long-term stewardship and post-injection responsibilities can support project confidence.” On public policy, it states: “Targeted public-private mechanisms may help address challenges associated with early-stage project deployment.”
The paper also addresses collaborative information sharing. It says: “Shared material would draw on aggregated, anonymized and sufficiently historic data, and would not identify any individual insurer, reinsurer, ceding undertaking or insured party.”
Limits of Insurance Cover and Complex CCS Value Chains
The paper uses the abbreviation CCS for carbon capture and storage. It describes the projects it addresses in broad terms and refers to increasingly complex carbon capture and storage (CCS) projects involving multiple emitters, shared transport networks, storage hubs and, in some cases, cross-border arrangements across two or more countries.
The paper includes a caveat on what insurance cover does and does not represent. It states: “Importantly, insurability and insurance coverage for a CCS project is not a certification or validation of a project’s environmental integrity, emissions reductions, permanence or sustainability credentials, unless specifically designed to address these issues.”
In the paper, the terms insurability and bankability are used in connection with the financing of CCS projects. The paper connects insurability to that financing and states: “Improved insurability can contribute to greater bankability, which in turn supports investability and ultimately the large-scale deployment of CCS.” InsuraBeat has separate coverage of carbon credit insurance in project finance.
Sector Voices at the Launch and a Webinar to Follow
The announcement carries comments from named individuals and attributes each comment to a stated function. The first comes from Bjørn Otto Sverdrup, Chair of OGCI’s Executive Committee, who said: “Enhanced risk management approaches can help build confidence, unlock investment and accelerate deployment.”
A further comment comes from Maryam Golnaraghi, Director of Climate Change and Environment at the Geneva Association, who said: “Insurance can play an important role in supporting emerging risks of carbon management value chains to scale projects, but insurability depends on more than the availability of insurance products.”
A further comment comes from Juho Lipponen, Coordinator of CEM CCUS Initiative, who said: “Insurance will play a key role in risk management.”
The announcement also sets out a follow-up event. It states: “OGCI, the Geneva Association and the CEM CCUS Initiative will host a webinar on 5 November to discuss the paper’s findings and how stronger insurability can support bankability, investability and ultimately greater deployment of carbon management projects at scale.”
