Carbon Capture and Storage (CCS) projects are vital to achieving global climate targets, but they present unique financial and technical challenges. Long project timelines, complex engineering, and environmental liability make securing investment difficult. Insurance solutions tailored to CCS can de-risk projects, enhance lender confidence, and unlock critical financing.
Fairmead’s Climate Risk and Resilience team provides integrated insurance programmes covering the full CCS value chain. These solutions protect construction and operational risks, technology performance, environmental liability, tax uncertainties, and counterparty credit risk. By mitigating these exposures, insurers make CCS projects more attractive to investors and lenders.
A first-of-its-kind CCS Leakage Risk policy, developed in collaboration with SCOR’s syndicate at Lloyd’s, protects developers against CO2 leaks. Coverage includes environmental damage, loss of revenue, devaluation of carbon offsets, and potential clawback of tax credits. This comprehensive solution addresses a risk that has historically hindered project financing.
Tax risk insurance is another critical component for CCS projects. Given the uncertainty surrounding future tax credit interpretations, these policies provide clarity and stability for investors, ensuring long-term bankability. By transferring tax-related risks to the insurance market, projects can secure funding with confidence.
Counterparty credit risk is also addressed through insurance, safeguarding developers against defaults from long-term offtaker agreements. Similarly, technology performance insurance guarantees that capture technology meets expected standards. Should underperformance occur, the insurance can assume debt obligations or cover remediation costs, protecting revenue streams and investor confidence.
By combining these specialized insurance products, CCS developers can secure funding at more favorable terms, reduce financial uncertainty, and accelerate the deployment of low-carbon technologies. This integrated approach demonstrates the critical role of insurance in climate risk mitigation.
In a broader sense, CCS insurance exemplifies how innovation in insurance can drive sustainability. By translating technical, environmental, and financial risks into structured, manageable coverage, insurers play an active role in global decarbonisation efforts, providing a foundation for green investment and long-term resilience.
