Oka’s Slater: Product design holding back voluntary carbon insurance

By Rebecca Delaney

Feb 7 - (The Insurer) - The future growth of the carbon insurance market hinges on greater refinement in product design rather than higher capacity or limits, according to Oka’s Chris Slater, with opportunities in the voluntary market expected to be driven by developers.

Oka founder and CEO Slater spoke to Sustainable Insurer as the carbon credit insurer’s Asta-managed syndicate in a box entered its second year of underwriting.

Syndicate 1922 began underwriting from 1 January 2024, having received in-principle approval from Lloyd’s in October 2023, with Slater confirming that the vehicle is “pretty much holding steady” on its stamp capacity for the 2025 underwriting year.

“I'm delighted with the first year's trading. There's a real sense of education that's going on in the carbon markets around how insurance can play a more fundamental role,” he said.

“Last year was the first year of trading in a very new market. From a carbon market perspective, it’s a challenging environment to be building into. We had some successful developments on the product side which is teeing us up nicely for 2025, but we also had a downturn in the carbon markets on the voluntary side.”

Slater added that despite signals from the Trump administration about its climate and environmental policy for the next four years, this is unlikely to dampen interest in the carbon markets in other regions, including the Middle East and Southeast Asia, notably Singapore.

“We've clearly had the Trump administration starting to shape how the climate agenda looks like on that side of the pond. What's going to be interesting is how the rest of the world responds. Other markets increasingly see this as a really important and scale opportunity,” said Slater.

“It's fascinating to see how the global market is growing – you wouldn't bet against climate, and this isn't going to go away. It's natural evolution in the market, which is where the Lloyd's syndicate gives the ability to meet where those demands may exist across the world.”

On the capacity side, six Lloyd’s players – Beazley, Ark, Markel, Africa Specialty Risks, Apollo and Hiscox – follow Oka’s lead line via Syndicate 1922 on a lineslip for the compliance markets.

Launched in June last year, Oka’s corresponding adjustment protect product is designed to cover credits traded into compliance markets under Article 6 of the Paris Agreement.

It was developed for the first corresponding adjustment tagged credits on Verra, a conditionally approved registry under the Carbon Offsetting and Reduction Scheme for International Aviation (Corsia).

Corresponding adjustments are a prerequisite for voluntary carbon credits used in compliance markets, including Corsia and other emissions trading schemes.

Last month, Verra published guidelines requiring an insurance certificate for verified carbon credits, backed by Oka’s Verra-approved product, in order to sell the credits into the airline market.

The product triggers in the event that a standards body such as Verra informs a developer that certain credits are no longer Corsia-eligible and must be replaced. Reasons for the registry decision – such as changes in government, administrative issues, or deliberate malfeasance of a developer contract – do not impact the policy settlement process.

“I think it's a blueprint for increasing quality regulatory influence into the carbon markets,” said Slater.

“How do certain buying groups or bodies ensure that the credits that their clients or representative corporates are buying are of high integrity and high quality? At the same time, how is the market dealing with exposures and risks?

“This is an interesting and pivotal point for the carbon markets – a problem has been identified, the market has been asked to solve it, [and] the insurance industry has come in with a solution. I think we'll see more of that development as the carbon markets grow.”

Voluntary carbon market

While there are various products available covering invalidation and reversal risks for the voluntary carbon market (VCM), Slater believes “no-one has quite cracked it yet”.

“There's lots of products but not a lot of premium,” he said. “The market is still evolving its understanding as to how insurance can play a role, and we as an industry are continuing to evolve and iterate products to design the exact solution.”

And with a lack of regulation driving necessary demand for insurance, growth and innovation is likely to be driven by the developers themselves.

For example, Oka’s carbon protect product – which can be bound on any project type or methodology – brought the first invalidation-insured biochar credits to the VCM last year after developer Oregon Biochar Solutions noticed an opportunity.

“It was very much developer-driven – they saw that if they could wrap their credits in insurance, potentially they could command a high price while providing the reassurance that buyers may need in contract discussions,” said Slater.

“I think that's where the market will continue to go – there are innovators in this space, but the market just hasn't matured enough to the point where that conversation is universal.”

He concluded that a “natural maturity” of the market also includes growing awareness among buyers around where risks exist and the need to impose conditions contractually.

“It's a natural evolution of a market where it doesn't require more capacity, it's not about limits holding people back, it's about product market and product customer fit,” he said.