Swiss Re New Markets is planning to offer insurance-related products for the CO2 market, but has elected for now not to trade CO2 emissions credits because there is insufficient liquidity in the instruments. The firm will revisit the topic after the United Nations Framework Convention on Climate Change Conference of the Parties in June, which is expected to clear up ambiguity surrounding the market, according to Chris Walker, associate director in Zurich. In July the firm started a feasibility study regarding trading emissions credits (DW, 7/24).
Walker said the reinsurer will offer insurance products aimed at parties trading CO2 emissions credits, including protection against counterparty default and insuring projects to generate CO2 emissions credits against risks such as political risk and natural disaster.
Swiss Re has also elected to invest in funds that trade CO2 credits to diversify its risk profile. The firm has a CHF100 million (USD59.8 million) fund that invests in sustainable resources funds that will now be able to invest in CO2 vehicles, Walker noted.
Trading CO2 credits became possible following the Kyoto Protocol on Climate Change, which requires sharp cuts in emissions from industrialized countries beginning in 2008. A credit is the entitlement to emit a specified amount of CO2.
