OREANDA-NEWS. March 24, 2010. IC ROSNO has prepared a special line of insurance products — Carbon Reduction Insurance Program — for the enterprises implementing the projects aimed at reduction of greenhouse gas emissions, and for the creditors thereof. The developed program takes into account the risks incurred by the participants of the market for greenhouse gas emission reduction units under the Kyoto protocol.

Presently, pursuant to implementation by Russia of the Kyoto protocol to the UN Framework Convention on Climate Change, the first competitive selection (tender) among the Russian joint projects aimed at reduction of greenhouse gas emissions into the atmosphere is being held. The selection will enable the Russian companies to attract "carbon financing" from the foreign investors interested in purchasing the emission reduction units. IC ROSNO has developed a line of specialized insurance products for the owners and participants of the projects submitted to the tender and commenced insurance coverage thereof. Primarily, these products are intended for reimbursement of damage from partial loss of "carbon financing". "This product line is innovative both for the Russian and for the international insurance practice. No one has yet developed a universal risk management toolkit to manage the risks associated with carbon projects. Therefore, based upon the successfully tested products with „carbon extension“, we also offered protection against technical risks accompanying implementation of emission reduction projects and, under certain conditions, the protection of the buyers of emission reduction units against financial risks", comments Mr. Sergey Solovyov, Deputy CEO of OJSC IC ROSNO.

The insurance coverage with carbon extension includes the entire package of property risks and financial risks, which can be insured either jointly, or separately. Among those are:

insurance coverage of the works related to construction and assembly of property (equipment and infrastructural objects), including insurance coverage against financial losses arising from any commissioning delays.

insurance coverage of the existing property (equipment and infrastructural objects) designed for implementation of the greenhouse gas reduction project, including losses resulting from any production interruptions in case of property-related insured accidents, including breakdown of machinery and equipment.

insurance protection of the creditors of carbon reduction projects in case of non-delivery (or short delivery) of emission reduction units as a result of bankruptcy or insolvency of the project’s Russian owner.

The investors of the Russian carbon reduction projects have already formed highly positive opinion about this new risk management tool. For example, Mr. Oliver Kayser, CEO of ECOCOM Climate Protection Umweltschutz LLC, noted the versatility, efficiency and affordability of the insurance programs offered by ROSNO: "Since long ago, we have been searching for the insurance product which would cover landfill gas neutralization and utilization projects. It has to be noted that it is the Russian insurance company which holds the leading position in this newborn market segment, creating a good base for modernization in terms of energy efficiency and environment in the Russian Federation."

"The insurance with carbon extension shows the innovation and leadership of ROSNO and Allianz Group in climate solutions", says Ingo Ramming, Executive Director of Carbon Trade & Finance. "These products complement existing derivative instruments and help to hedge not only the price risk but as well against lower ERU delivery rates. Project operators and investors are now able to ’pick and choose’ the risks they want to take and optimize the risk/reward profile of carbon projects."

"The new insurance product covering the risks associated with generation and, respectively, delivery of „carbon units“ represents an attractive and promising solution for the joint implementation projects. I believe that this approach will find its client, primarily, when speaking of forward sales of these units", comments Mr. Vsevolod Gavrilov, head of the Energy Efficiency Directorate at Sberbank of Russia. Sberbank performs functions of an operator of the Russian carbon units and arranges the tender for joint implementation projects.

Ecological responsibility of the business is of significant importance for ROSNO. "In 2008, the company joined the global emission reduction project of its shareholder — Allianz Group (aiming to cut CO2 emissions by 20% by 2012 versus 2006), says Mr. Leonid Golovanov, head of the Agricultural and Natural Risk Insurance Department of OJSC IC ROSNO. — The company has implemented Allianz’s Environmental Management System, implying economical and careful treatment of resources and environment (in terms of energy, water and paper consumption, business trips and waste). Each year, ROSNO provides an ecological balance sheet of its activities."