Parametric Insurance & Carbon Credit Risk

Growing wildfire risks hinder carbon offset efforts 

Burning more often, more intensely, and for longer – wildfires are increasingly impacting the global forestry industry, calling for parametric insurance to cover the risks. As the demand for forestry assets continues to rise steadily, wildfire represents an increasingly significant risk exposure. To date, more than 17,000 wildfires have burned over 800,000 acres in the US -meaning that an average of about 6 acres per minute are burned. Much of western US is already suffering from severe drought, and the hot and dry weather that human-caused global warming has brought about will accelerate the risk of wildfires accordingly. 

According to the analysis presented in a UN report, the chance of intense and catastrophic fires could grow by up to one-third by 2050 and up to 52% by the end of the century under a moderate global warming scenario. This might be increased by up to 57% if emissions are not reduced and the climate continues to warm. This rising wildfire risk poses a major threat to forestry investment, timber and pulp & paper companies and TIMOs. TIMOs are especially vital to the production of Carbon Credits that help reduce greenhouse gas emissions into the atmosphere. Losing carbon credit inventories is a significant additional exposure TIMOs are facing. 

As a result of the escalating wildfire risks, traditional insurers have decided to reduce their commitment, leading to decreased supply and increased pricing. Amid capacity constraints and hardening of traditional insurance markets, parametric insurance presents a critical solution that offers extremely advanced and precise modeling of wildfire risks within a client’s budget. 

Parametric wildfire insurance offers protection for carbon offset inventories

In cooperation with your insurance broker, Descartes Underwriting offers a cutting-edge solution to cover your wildfire exposure and protect your carbon credit inventories. Our parametric solutions help forestry businesses build resilience and support their drive for carbon offset with the swift pay-out process. 

Fill out the form to download our Fact Sheet on how Descartes Underwriting plays its role as a provider of innovative risk transfer solutions in the global wildfire crisis.