Frequently Asked Questions

Corresponding Adjustments are a prerequisite for voluntary carbon market (VCM) credits used in compliance markets, including CORSIA and other emissions trading schemes. Buyers who must retire credits to offset their emissions risk non-compliance if they use a credit that has not had a Corresponding Adjustment.

The policy pays out to the insured in the event that a Corresponding Adjustment is not applied to a credit, allowing the insured to replace it with an Article 6 authorized credit. In this way, the buyer of the credit can maintain compliance with the relevant carbon market rules and have confidence that their carbon investment has not been double claimed.

Each carbon credit will have a stated value provided by the insured to Oka. The policy will pay out the stated value per credit times the number of insured credits, less a retention.

The developer (or, in the case of developer insolvency, the credit holder) can easily adjust stated values during the life of the policy. This is done through a simple endorsement process. Additional premium may be required if the stated value of credits increases or premium may be returned if the stated value decreases. This change in premium will be charged or refunded pro rata based on the remaining term of the policy.

The policy term is flexible and can be two, three, or four years from the policy start date, with the option to request renewal at the end of a term.

The policy can start after the credit has been issued and “first transfer” has occurred.

Yes, the insured will be able to provide a copy of the insurance policy to the owner of the insured carbon credit.

The policy excludes:

1. Host countries that are on a sanctioned list issued by the US, UK, or EU.
2. Litigation costs, injunctive or equitable relief, punitive damages.
3. Losses caused by:
1. Invalidation of the credit itself by the registry (due to over crediting, measurement errors, project failure or other invalidation event)
2. Registry collapse
3. Cyber events
4. Nuclear events
5. War, terrorism, strike, and civil riots

Oka delivers your quote at no cost to you within a few business days. To prepare a quote, we need the following:

• Project Name(s) and ID(s)
• Credit Volume(s) 
• Stated Value(s) 
• Vintage Year(s)

Carbon credit buffer pools hold non-tradable “buffer” carbon credits to cover the non-permanence risk associated with carbon offset projects. A single account holds the buffer credits for all projects. In the case of a reversal, buffer credits are canceled to protect carbon known or believed to be lost. In theory, as long as the buffer pool remains solvent, the program’s permanence remains intact. 

Buffer pool risk models are not dynamic and do not account for growing catastrophe risks. Moreover, buffer pools cover only unexpected natural risks — such as fire, droughts, and disease — but not other risks associated with the credits, such as fraudulent issuing or human induced reversals. 

There is a risk that buffer pools are severely undercapitalized. A recent Frontiers article found that nearly one-fifth of California’s total forestry buffer pool was depleted in under a decade, equivalent to over 95% of the program-wide contribution intended to manage all fire risks for 100 years. 

Buffer pools alone cannot mitigate the many compounding risks that face a carbon credit throughout its lifecycle with buffer pools. By comparison, Oka transfers carbon credit risks and converts them into a cost that can be managed upfront, increasing the value of sellers’ credits and securing corporations’ carbon investments.

A carbon credit must have a comparable environmental impact to achieve GHG emission reductions. The world must be at least as well off when a carbon credit is used than it would have been if the credit owner had reduced their carbon footprint. Therefore, carbon credits must be associated with GHG reductions or removals that:

• have a robust determination of the GHG emissions impact (i.e. additional, not vulnerable, not overestimated)
• avoid double counting
• address non-permanence
• facilitate a transition towards net-zero emissions
• have strong governance arrangements and processes
• are not associated with significant environmental and social harms

When these criteria are met, credit owners have a high degree of confidence their carbon credit investments are high-quality.

There are unforeseeable and unavoidable post-issuance risks, associated with buying carbon credits, including invalidation and reversal.

• Invalidation risks 
• Overcrediting, Non-Additionality, Adverse Impacts, Exclusive Claim, Project Fraud 
• Natural Catastrophe Reversals
• Wildfire, Flood, Storms, Droughts, Earthquakes, etc.
• Human Induced Reversals
• Negligence, Misconduct, Project Failure

Oka is de-risking the voluntary carbon market (VCM) for buyers and sellers of carbon credits. Corporations can better honor their climate commitments by purchasing insured credits which effectively mitigate these risks and protect their reputations.

In the event of an approved claim, Oka’s Carbon Protect policy would pay out for events such as:

• Wildfire destroys half a forest and the developer doesn’t have the funds to re-forest and recover
• Project fails financially due to mismanagement or lack of funding from credit sales
• Project discovered to be non-additional due to land already being protected before start date of project
• Project discovered to be over-credited due to aggressive baseline selections
• Community stakeholders go back to business as usual practices due to opportunity costs

For inquiries regarding our products or to request a quote for specific projects, please reach out to our Support Team at: help@carboninsurance.co or +1 (435) 200-3222.

As a Lloyd’s syndicate, Oka benefits from the financial stability and governance at Lloyd’s, whose financial strength ratings can be found here. As a syndicate, Oka also benefits from the strength of the Lloyd’s brand, the global license network, and a wide range of other central activities carried out on behalf of the market.

Oka’s coverage is also supported by some of the largest reinsurers, providing extra capital and stability to our products.

Under Lloyd’s’ regulations, Oka is required to estimate all its future claim liabilities and must hold assets in trust to meet these liabilities. It is subject to strict regulatory oversight by Lloyd’s and is regularly audited to ensure it meets stringent capital adequacy requirements. Oka also partners with reinsurers that provide capital and help ensure claims are paid.

In addition, Lloyd’s governance means that Lloyd’s’ A-rated central fund acts as a backstop to all risks written by the syndicate.

The VCM of today is fragmented and subject to serious governance issues. Given the demand for carbon credits and increased scrutiny on public corporations committing to decarbonization strategies, carbon credit sellers need ways to build trust with their corporate buyers  — and the world needs a VCM that clears the pathway to net zero. 

Carbon credit insurance delivers security, confidence, and protection in an evolving decarbonization landscape. Oka ensures carbon credit sellers can offer high-quality carbon credits as part of their portfolio and public corporations can protect their investments and their reputations when engaging with the VCM.

According to the Intergovernmental Panel On Climate Change (IPCC), the world has until 2030 to take definitive action to mitigate the impacts of climate change to prevent global temperature increases exceeding 1.5°C. Carbon credits are necessary to offset residual emissions, but the voluntary carbon market (VCM) is opaque and unregulated. Insurance will help accelerate the transition to net zero by de-risking the VCM. Oka believes that projects’ reliability, transparency, and scalability will improve as insurance becomes a default feature of carbon credit transactions.

The proposed SEC Climate Rule will require public companies to disclose their carbon emissions and decarbonization targets and progress to investors. Specific requirements and timings will be announced in the final version of the rule, expected in 2024.

The SEC environmental disclosures will require emissions disclosure from any public company listed in the United States. The landmark proposal, released for consultation in March 2022, requires the disclosure of:

• Projected risks and material impacts on the business, strategy, and outlook caused by climate change.
• Scope 1 and scope 2 GHG emissions
• Scope 3 if the material or the registrant sets an emissions reduction target that includes Scope 3 emissions.
• Governance of climate risks and risk-management processes
• Decarbonization plans with interim targets

The proposal is broadly aligned with frameworks proposed by the Task Force on Climate-Related Financial Disclosures.

Not only must companies with voluntary net-zero commitments be more explicit about their objectives and interim targets, they must also specify their use of carbon credits (per pages 77 and 271 of the proposal).