Insuring Forest Carbon with James Kench

In this episode, I am joined by James Kench, Head of Insurance at Kita. In our conversation James discusses the role of insurance as an enabler to mobilize capital into natural climate solutions in forestry. He describes how their product has been structured to address the most significant risks observed in forest carbon projects, giving some insights into what those risks are. He explains that given its ‘newness’ in the insurance market and the period in a forest carbon project’s life when it is most likely to experience a claim event, that no claims have yet to be made. He gives some great advice to investors looking to participate in forest carbon markets, on what risks they should consider.  Details 00:37 Intro to James Kench & Kita 03:30 James explains about the different types of nature-based solutions 04:39 Typical client profile explained – corporates and investors 07:27 Insure every asset in the portfolio or asset by asset? 09:18 Portfolio vs individual – underwrite specific transaction 10:28 What happens if a project fails – dimensions of risk 15:09 Delivery risk & concept and execution phase until credits are issued 17:54 How Kita underwrites and how it affects pricing 20:55 Moral hazards 23:54 Characteristics that makes assets uninsurable 26:09 Process of raising capital for offering insurance 29:03 Future of carbon markets 32:17 Examples of actual claims 37:06 Contact details Significant quotes:[07:37]            The main pain point we wanted to solve is that there's reasonably good supply of carbon credits out there, but they're not necessarily a good supply of high-quality credits, and the best way to secure high quality credits is to lock in investment at an early stage of the project.[08:32]            If the project has failed or has not performed as much as hoped, then our insurance would kick in, and then we would be able to make the investor or the corporate whole, either in cash or in like for like carbon credits.[14:10]            But where we see investors coming in to lock in that supplier of the most high quality projects, they're very actively trying to source and originate projects all over the world and get in as early as possible because that enables them to secure that supply and secure a good price and then have hopefully a bit more influence and control over the sort of management and success of the project over the longer term.Links mentioned:Kita: https://www.kita.earth/LinkedIn: https://www.linkedin.com/company/kitaearth/Sound Library:Nature by MaxKoMusic/SoundcloudSopwell Woodlands and Scohaboy Bog SAC, Cloughjordan, Co Tipperary, IRELAND by wild_rumpus/SoundcloudSign up now for the ForestLink’s newsletter, where you’ll receive technical advice, reflections, and best-practice guidance to support you with your forest-linked investment strategy or business straight to your inbox. Hosted on Acast. See acast.com/privacy for more information.