Descartes Underwriting, which began selling this specific type of policy in the past year, has become a major player in the Australian market, offering up to $200 million in coverage. Unlike traditional insurers who may cover the loss of timber value if it burns, Descartes covers the financial loss of the carbon credits and/or the replacement value of the timber. Quick payouts are available after certain triggers are activated without the need for in-depth analyses.
Why is the Insurance Needed
Timber investment management organizations can't generate carbon credits if their assets are destroyed, which can result in a major income drop. In this context, this policy allows clients to protect their Australian carbon credit unit inventories and maintain financial stability. If a client's hectares of burnt area and consequential losses exceed an agreed-upon deductible, Descartes will pay up to the policy's limit.
How is the Loss Detected
With the use of precise satellite imagery, the company monitors plantations or regrowth projects for any signs of damage. Fire losses are aggregated over a period of approximately twelve months, or for the duration of the bushfire season.
Other Parametric Insurances
Descartes is a Paris-based company with offices all over the world, and it writes parametric insurance for crops, natural catastrophes, non-damage business interruptions, and renewable energy operations worldwide. The company has also been writing parametric insurance for timber investment management organizations for many years.
Parametric insurance is quickly becoming an essential tool for protecting forestry businesses' carbon credit investments while also safeguarding against the risks associated with natural disasters. Forestry firms around the world should consider this insurance to preserve capital and profitability by obtaining new policies to help mitigate these risks.
