Protecting carbon credits through data-driven insurance solutions

As Australia and New Zealand continue to face wildfire risk, Timber Investment Management Organizations (TIMOs) issuing carbon credits are left incompletely insured by the traditional market

Amidst climate volatility, forest fires have become a major concern on nearly every continent. In 2022, this phenomenon struck particularly hard in the USA, France, Morocco, Russia, Chile, China, and Australia. Though the Bureau of Meteorology (BOM) points to a weakening of La Niña, there are also signs of an emerging El Niño. The impacts of El Niño are particularly concerning as it causes hotter, drier weather across most of the region, heightening the risk of wildfire. 

The summer bushfires of 2019-2020 were particularly violent, costing Australian agriculture between A$4 billion and A$5 billion, including $1.3 billion in insured claims. However, many timber companies issuing carbon credits were left uninsured. What’s more, in the case of a bushfire, the loss of timber value is only covered by traditional insurance. However, the financial loss of carbon credits or the replacement value of timber is not.

Descartes’ parametric insurance uses predefined triggers to accurately measure potential financial losses from bushfire driven carbon credit inventory impacts, as well as reforestation costs. This tailor-made, data-driven coverage ensures transparency and reliability, as the client has peace of mind they will receive their payment following a wildfire event. 

Check out our case study to discover how parametric insurance secures TIMOs’ carbon credit revenues and timber value.