The World Bank’s Multilateral Investment Guarantee Agency (MIGA) has introduced a new insurance framework designed to reduce investor risk in the UN’s emerging carbon market under Article 6 of the Paris Agreement. This marks a significant move to boost private sector participation in green finance, particularly in developing countries where risk remains a critical barrier.
Aerial drone view of a reforestation project in a developing country. Ai generated picture.
Central to the initiative is the launch of a standardised Letter of Authorisation (LoA), which enables host countries to approve carbon credit transactions formally. The LoA will be backed by guarantees from the World Bank Group’s Guarantee Platform, ensuring coverage against political and contractual risks.
‘The LoA represents a significant step forward in de-risking the carbon credits market’, said Hiroshi Matano, MIGA Executive Vice President. ‘Through the World Bank Group Guarantee Platform, we aim to strengthen credibility and accelerate growth in carbon markets by reducing risk for private sector investments in developing countries.’
The new mechanism also introduces a formal dispute resolution process and outlines compensation protocols for projects that fail to deliver the promised carbon credits. This added legal structure aims to address longstanding concerns around transparency, delivery, and the integrity of carbon credit projects.
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Concerns such as double-counting of credits and missing ‘corresponding adjustments’ by governments have historically limited investor confidence and supply in the international carbon market. The World Bank’s program aims to address these gaps by offering political and credit risk guarantees and encouraging more consistent regulatory engagement.
The move also comes amid a flurry of private-sector initiatives targeting carbon credit risk. Last week, Marsh and We2Sure launched an insurance product for carbon credit fraud, while earlier this year, Howden partnered with Respira International and Nephila Capital to roll out invalidation insurance for the Voluntary Carbon Market. Firms like Kita and Oka are also building dedicated insurance solutions for carbon assets.
As carbon markets evolve and the lines between compliance and voluntary schemes blur, insurance is becoming an essential layer of trust and stability. MIGA is now inviting project developers and investors to apply through its online portal or reach out directly for more information on how to access this new coverage.
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