We recently spoke with Zachary Kane, Senior Vice President of Growth at Oka. Oka specializes in insurance products designed to mitigate risks in the voluntary carbon markets. Their most recent solution is focused on providing insurance coverage to protect against the risk of an authorized credit losing its Article 6 authorization due to a Corresponding Adjustment not being made by the host country. Zachary’s background in both insurance and carbon markets uniquely positions him to address the evolving needs of this sector. 

Key Takeaways 

• Oka’s ‘Corresponding Adjustment Protect’ solution aims to protect project developers from the financial risks associated with a corresponding adjustment failure. 

• The company specializes in insuring credits after they have been issued, filling a critical need in the market. 

• Oka is actively partnering with carbon registries to establish insurance as a standard risk mitigation mechanism in the CORSIA market 
• By providing insurance coverage for CORSIA-eligible credits, Oka is incentivizing greater participation in the market.

Introduction and Background 

CCarbon: Thanks for joining us today. Could you start us off with a brief introduction about yourself? 

Zachary: I am part of the founding team of Oka, The Carbon Insurance Company™ (Oka). My background is in both insurance and the carbon markets separately, but they came together when I joined Oka. I previously worked for an international NGO selling carbon credits to large corporations, such as PWC and Microsoft, before following a mentor into the insurance space. I did not think that I would be coming back to carbon markets. But the advent of carbon insurance, pioneered, in part, by Oka, was a serendipitous opportunity.  

cCarbon: Could you provide a brief background on the work Oka is involved with? 

Zachary: Oka aims to bring security to a market without modern risk mitigation or risk transference solutions. We keep hearing that carbon markets lack integrity and quality, and we believe that insurance —while by no means a silver bullet —plays a pivotal role in changing that. We have released two dedicated carbon insurance products to support different market participants. Financial risk is not unique to buyers; whoever holds the credit is subject to a potential loss. We decided to treat the carbon markets like any other; and in every other market, insurance is a vital means of securing the assets of every participant. 

Identifying the Need for Insurance 

CCarbon: How did you identify the need for an insurance product, specifically for the corresponding adjustment failure in the carbon market? 

Zachary: Oka is a team of insurance experts, including actuaries, underwriters, and insurance executives with extensive experience in markets where insurance didn’t exist previously. We explored how we could apply that expertise to this market, using actuarial modelling, and proprietary underwriting methodologies.  

Early this year, we were working with a developer on a solution for a buyer who was concerned corresponding adjustments might not happen. Then the registries highlighted the problem. At that point, we began collaborating with the leading registries to identify how insurance could play a bigger role across the industry by removing the risk of a failed corresponding adjustment or even revocation of the letters of authorization (LoA) by the host country. 

Corresponding Adjustments and Registry Collaboration 

CCarbon: Would different registries have a different solution to deal with the various risks associated with the corresponding adjustment? 

Zachary: It varies depending on the registry. Some explicitly list the need for insurance. Others require ‘a guaranteed mechanism,’ allowing for more options. The reality is that very few, if any, developers have an interest in the existing risk-mitigation mechanism: buffer pools. Insurance is a better solution, as it is both more affordable and provides greater liquidity. Instead of locking a percentage of your credits in a pool, you simply insure and continue to sell them.  

CORSIA is going to lead to a supply crunch, with too few eligible credits to meet demand. If a portion of those are locked away and cannot be sold, it will exacerbate the issue. This is also going to be a problem when you need to find replacements. If we can create more security in the CORSIA market, however, we believe more developers will go for LoAs and pursue the opportunity.  

CCarbon: Who are the other key stakeholders you are engaging with when developing the insurance products? 

It is really across the whole carbon ecosystem. We are working with both the registries and the developers. With regards to corresponding adjustments, the developers are on the hook and so the focus of our engagement. Buyers, and even some intermediaries and brokers, bear less responsibility. At the end of the day, the developers are the ones required to replace the credits in the event of corresponding adjustment not being applied. That said, we engaged with the entire market during the process of product development, as we wanted to get insights from the airlines and other end buyers.  

CCarbon: Could you walk me through the process of how a claim would be filed and processed in the event of a Corresponding Adjustment failure?  

Zachary: It is a straightforward process right now. If the Article 6 label is removed, then Oka pays out. The developer that holds the policy would file the claim, which we would then investigate to discover whether the corresponding adjustment had taken place or not. If not, we would find out why not, and pursue the case if there were a potential solution for the host country and  developer. If there were not, we simply pay the stated value of the credits. So, the policyholder sets what they believe to be their replacement costs, and then we pay out what the replacement value is at that stated value.  

Partners and Ecosystems 

CCarbon: Are there other project developers besides DelAgua that Oka is currently in talks with for potential partnerships? 

Zachary: We are speaking to a number of different developers pursuing LoAs, ranging from those signed LoAs to those still considering it.  

Another thing on which we are working is defining what an insurable LoA looks like. The goal is to proactively assess LoAs before they are signed, identifying potential risks related to specific host countries or language within the LoA that may not align with our risk tolerance. These could include unfavourable arbitration language, unclear timelines, specific NDC commitments, or other factors that might deter us from direct involvement. 

CCarbon: How does Oka differentiate itself in the market? 

Zachary: While most of our peers focus on pre-delivery, we primarily focus on post-issuance credits. There must be an issued credit or actual insurable asset for us to apply our coverages which separates us from everyone else.  

CCarbon: What kind of feedback have you received from potential users of this solution?  

Zachary: It has been extremely positive. Since the announcement, we have bound policies  and been inundated with requests for quotes. People are quite excited about CORSIA. It’s a market with momentum, and an opportunity for price differentiation. There’s a rush towards the CORSIA tag, and insurance will be a big part of that. The industry itself is actively seeking ways to ensure higher integrity in carbon offset projects. While insurance is not a guarantee of quality, an insurable project or credit speaks volumes relative to an uninsurable one. If you are a buyer, and you find out that the project from which you’ve just bought or are about to buy is uninsurable, it may influence your purchasing decision when there are alternatives that have been underwritten, coverage in place, and a third-party guarantee.  

The Future 

CCarbon: What are your plans for expanding your product portfolio? Are there other market segments you are targeting for growth?  

Zachary: There is interest from and opportunities in a number of areas, especially other compliance markets incorporating Article 6 (such as many Southeast Asian markets). Stakeholders want coverage for invalidation/cancellation risks and are worried about the existing risk mitigations within their space, or the fines they could incur. Ultimately, we are creating an environment where corporations are comfortable buying carbon credits. Rather than going too broad, we will be focusing on the main pressure points where we can really make a difference.