Page 42 - Insurance Times September 2023

Carbon Emission

Insurance- A New

Tool for Mitigating

Climate Change Risks Group Managing Director
Rohit Boda

J. B. Boda Group

Carbon emission insurance can be viewed as a financial product designed to mitigate the financial
risks associated with climate change. It functions as a form of insurance coverage that
compensates policyholders for damages resulting from the financial consequences of exceeding
predefined carbon emission thresholds.

T he future of our planet is filled with uncertainties It operates on a very simple mechanism. These insurance

policies can be purchased by businesses, cities, or even
due to the challenges posed by climate change,
entire countries as protection against the expenses they
and its influence on ecosystems, businesses, and
communities across the world. The consequences
The level of coverage and premium rely on a number of
of our carbon-intensive lifestyles become more evident – might face if they fall short of their emission reduction goals.
from intensifying storms to rising sea levels. It becomes variables, including the activities, carbon intensity, the
increasingly clear that we need to counteract these severity of projected climate impacts, and the aim for
developments. To effectively reduce carbon emissions and reducing emission.
minimize the risk of climate change, creative solutions are
needed to address this pressing issue. This dynamic involves a collaboration of key stakeholders.
Insurance companies, driven by both economic feasibility
Understanding Carbon Emission Insur- and environmental responsibility, underwrite policies that
ance: A shield against Climate Peril incentivize emission reduction and offer protection in case
of non-compliance. Policyholders, ranging from businesses
Carbon emission insurance can be viewed as a financial
to individuals, play an active role in reducing emissions to
product designed to mitigate the financial risks associated
avoid penalties while benefiting from financial safeguards.
with climate change. It functions as a form of insurance
coverage that compensates policyholders for damages Benefits of Carbon Emission Insurance:
resulting from the financial consequences of exceeding
predefined carbon emission thresholds. In essence, this Forging a Sustainable Future

insurance policy aims to promote carbon reduction by Incentivizing Emission Reduction: By providing a financial
creating a financial incentive for individuals, businesses, and safety net tied to emission reduction targets, carbon
industries to take proactive steps to curb their emissions. emission insurance motivates individuals, businesses, and

The Insurance Times September 2023 37