Our Founder & CEO Chris Slater speaks with Sightline Climate (CTVC) about the crucial role of insurance in the climate capital stack, plus Oka’s unique approach to risk mitigation in carbon markets, specifically. Discover how specialist insurers, like Oka, help climate tech projects overcome bankability blocks and achieve scale.

Here are Chris’s insights from the article: Insurance, the icing on the capital stack cake as they dive into MGA models in climate tech.

What are the project finance or execution risks in your sector?

Chris Slater @Oka: When you start a project, from day one to its end, there’s always uncertainty whether it’ll kick off as planned and actually start sequestering carbon. It’s not just about getting it off the ground; even after we issue credits, there’s this ongoing challenge to make sure they keep their value and do their part in meeting net zero goals. Insurance becomes essential across the board, so we’re juggling risks throughout the project lifecycle like reputation, finance, and staying on top of regulations. 

How does your insurance product address one of the key risks?

Oka: We cover two main buckets: invalidation and reversal risk. If carbon gets put back into the atmosphere by virtue of either a natural catastrophe, or by something human induced like illegal logging, you risk invalidation of credits. In any one of those situations, if the registry chooses to invalidate or remove the credit, then our policy pays out. So we price for all these coverages against many carbon project types.

Who do you sell to within this insurance value chain?

Oka: We target the post-issuance stage of credits, similar to how bonds work. We wrap these issued credits with our insurance product, making them more appealing in the market. It’s like giving the credit a quality boost and a safety net for the buyers. We get in there at the point of sale through intermediaries so when companies like South Pole or Climate Impact Partners are dealing with their clients, our insured credit could be embedded as part of the overall package.

What’s the benefit of an MGA over a general insurance company?

Oka: Large carriers struggle because they want 40 years of auditable data to be able to assess the claims history and price the risk accordingly. What we need to be able to do is differentiate between a good versus bad project. So we use data, price it, and then get into the market to test it and iterate from there.

What’s your diligence process for underwriting risk?

Oka: We’ve built our pricing underwriting models over the last 9-10 months and have priced about 7,000 projects. We insure nature based technology engineered removals and removals in all regions or locations. We’ve taken an underwriting approach to it but we’re effectively now working with customers to embed it into their point of sale of all carbon credits.

Read the full articles to find insights from more MGA’s and learn how insurance is the key to unlocking the climate capital stack.