Nature Markets Lack Confidence. Not Supply.

Insurance is rapidly becoming core infrastructure behind nature markets, helping unlock investment, strengthen project credibility, and enable carbon and biodiversity markets to scale with confidence. At the recent Scottish Forum on Natural Capital summit, sector leaders offered valuable insight of where the market is heading.

Event Summary: Scottish Forum on Natural Capital

On a clear morning in Edinburgh, with Arthur's Seat visible through the windows, a room full of investors, developers, corporates, academics, foresters, and financiers gathered for a day built around a deceptively simple question: what does insurance actually do for nature and carbon markets, and why has it taken this long to show up? 

How insurance for a nature project works 

The day opened with Will Butler, CEO and Founder of GaiaSicura, walking the room through the mechanics from the ground up, pitched for an audience that, by his own acknowledgement, knew far more about natural capital than the specialty insurance market underpinning it. 

His opening set the tone for everything that followed: would you buy a house from a developer that had no insurance? Would you invest in a property scheme with no cover in place? Nobody in the room raised their hand. Yet that is effectively the position much of the nature market has been operating in as only 4% of Carbon schemes globally are insured, and almost none of the current Biodiversity market is insured in the UK, with Scotland having the first example of an insured project to date. 

Butler's argument was that markets don't scale via capital and revenue alone; they need a third ingredient – confidence – and insurance is the mechanism that has historically supplied it at a fundamental financial level for other asset classes. A key comparison was timber and crops, which have been insured for centuries, as has property. He outlined the four core buckets of insurance available to the sector (Nature Restoration, Nature Replacement, Non-payment / credit insurance, and Commercial insurance) and how they can be used independently or layered together, before drilling into why (Environmental) Professional Indemnity (EPI) insurance is so critical for the advisers, verifiers, ecologists and intermediaries operating in this space.  

A project-specific insurance example prompted a sharp question from the floor: how does this compare to a standard buffer pool, and is insurance genuinely a better mechanism than the 20% buffer approach most schemes default to?  

This met with a direct response – yes! Insurance has the opportunity to remove the buffer and free up 20% of a project’s ‘stock’, allowing you to move into your next opportunity at a significantly faster pace. The buffer was something designed to protect the market prior to the availability of insurance but is now something that restricts its potential. If any other asset or investment class required you to hold back 20% of revenue opportunity, it would cut too deeply into margins and quickly become unattractive.  

The session closed on two challenging questions from the audience: how do you price a policy against the true replacement cost of carbon units, and why has this technology and marketplace only emerged now, after decades of voluntary carbon trading. Those questions would be explored in greater depth during the following 2 sessions.  

Insurance for carbon markets 

The first panel brought together Tom Dillon (Regenerate Outcomes), Alek Pillay (Kita), and Russell Galt (Nature Broking), picking up directly on the 4% statistic and asking why voluntary carbon markets (VCM) have been so slow to insure, and why it matters now. 

Pillay was clear about the drivers: insurance is increasingly required by investors and lenders, and its presence lends validity to a project when it is backed by A-rated Lloyd's of London capacity. It forms part of the broader structuring of VCM as regulation continues to tighten. 

Dillon offered a memorable framing through what he called the "Guardian effect". Intense public scrutiny of VCM projects over recent years has driven stronger regulatory standards, with insurance naturally following in its wake. Both agreed that awareness of insurance products has broadened, even if uptake is not yet universal, and that project quality and reporting have improved significantly over the past two years, making underwriting a far more straightforward process than it once was.  

Galt gave the clearest picture of what due diligence on a carbon deal looks like: assessing developer financial health, governance strength, scientific feasibility, co-benefits, and SDG contribution before turning to external risks and mitigation measures. He distilled the process into three headline risks: delivery failure, long-term reversal risk, and implementation risk, informed heavily by lessons from the US market's experience of historical over-crediting. He also highlighted the obvious tension. Microsoft can spend tens of millions of dollars on due diligence for a single deal, but at the scale at which most UK projects operate; that process must be radically compressed. 

An audience question about scale prompted Pillay to explain how Kita approaches accessibility: designing products to be as simple and standardised as possible so that even relatively small farms can access cover, while noting that portfolio insurance almost always proves more cost-effective than insuring projects individually. 

Asked whether registries themselves could be insured, he described two live approaches: first, a policy sitting behind the buffer pool as a form of reinsurance; and second, a standalone reversal-risk policy that could, in principle, be applied at registry level. However, Standards Bodies have so far preferred project-by-project arrangements over collective structuring. 

Galt concluded the discussion on buyer behaviour by noting that sophisticated buyers generally know exactly what to look for, while less sophisticated buyers tend to follow the herd and assess developer staying power, a clear nod to the value of a compelling project narrative underpinned by financial and ecological fidelity, likened at one point to selling whisky, which naturally some in the Edinburgh based crowd could align with.  

Insurance for nature-based solutions 

The second panel heard from Simon White (DUAL), Ben Sharples (Michelmores), and Jamie Frere-Scott (Finance Earth), chaired by Dr. Hannah Rudmann (Highlands Rewilding) shifting the discussion from carbon markets to the more niche world of nature-based solutions and BNG. 

White offered the panel's most striking example: underwriting a project that sat entirely outside any existing legal or regulatory framework. With no framework to anchor the policy against, DUAL lent on traditional property insurance principles. That meant assessing what the asset was worth today, what it would be worth tomorrow, and effectively treating nature as an insured asset in its own right. He was clear that the absence of a formal Biodiversity Net Gain framework does not remove the underlying obligation to underwrite to a robust standard; it is still fundamentally the property that is being protected. 

Sharples focused on the human friction that insurance helps resolve. Landowners seek full indemnity; responsible bodies or buyers want certainty over what they are certifying and receiving, and the gap between those expectations creates continual potential for dispute. Insurance, he argued, is well placed to help bridge that gap. 

He was equally candid about Landscape Recovery, England's flagship ecological scheme south of the border, describing it as a case study of good intentions colliding with investor reality. Short-notice provisions and extensive checks and balances sit awkwardly alongside the low-risk profile that pension fund capital typically expects, even though pension funds are precisely the investors the scheme is designed to attract. 

Frere-Scott made the funding case most explicitly: insurance can help unlock cheaper loans and more favourable financing terms for developers while giving buyers greater confidence to commit. White reinforced that insurance's role is not to replace contracts or due diligence, but to underpin both. 

When asked whether public and philanthropic funding reduced the need for insurance, Sharples pushed back. Public money comes with significant conditions attached, he noted, and mandatory insurance is increasingly likely to become a standard requirement of grant funding rather than an alternative to it. 

Insurance as funding sources: blockers and unlockers 

The final session had William Butler return to the stage to cover an often brought up area of how to move insurers into understanding the impact nature has on risk reduction and how to have them fund – or at least enable – easier ecosystem service payments. The consensus was that entities have become reasonably good at aggregating supply, and landowners and developers are increasingly organised, but demand aggregation is lagging behind. Confidence, it was argued, only grows from a properly functioning two-sided market, and getting there requires the market to place genuine, durable value on natural capital in the way it has always valued timber and crops.  

The session touched on reinsurer engagement, referencing existing flood-risk precedents like FloodRe and the Flood Action Coalition as a template for how nature risk might eventually be pooled at scale, led by insurers as aggregators, and on the importance of developers telling a credible, differentiated story, the difference between a responsibly managed estate and an overcropped one being, in insurance terms, night and day. By utilising standardized data and information, pooling demand, focussing services on specific affected demand groups, stacking revenue streams in a way that provides additionality and commercial value, and understanding the correct framework models being used, projects should be able to see funding flow and commercial longevity unlock at scale.  

Ultimately it is clear that there is a necessity for standardization and wider market infrastructure before significant commercial investment can engage, and insurance investment is no different. 

Open discussion and Q&A 

The closing session ranged widely. An early question on political upheaval - with BNG's own framework in England thrown into uncertainty early in its implementation, developers continued schemes regardless - a signal of underlying conviction even amid Westminster policy churn, and the panel debated whether a similar shock to carbon markets was plausible, concluding the key frameworks are not directly transferable but the underlying anxiety is the same.  

Pillay confirmed that a level of political and regulatory risk cover already exists, protecting against confiscation, cancellation or adverse regulatory change, and can easily be structured for any party in the chain. Such cover is increasingly becoming a prerequisite for capital entering higher-risk jurisdictions. 

On the limits of insurability, White was blunt: the fundamental laws of insurance still apply. A known, unrectified structural issue that repeatedly causes loss is not something insurance is designed to cover. Instead, insurance exists to protect against unforeseen events and instances of accidental negligence that fall outside a party's reasonable control, rather than repeated or knowingly unmanaged failures. 

Pillay described how Kita builds for underperformance as well as total project failure, structuring policy limits so a total loss at year five relates proportionately to the financial provision built in against a 30-year project value. 

Pricing remained one of the thorniest open questions. Frere-Scott pressed Pillay directly on how the cost of insurance compares with credit prices, and whether insured credits genuinely command stronger ratings and higher prices. The panel's answer was a qualified yes, although Galt acknowledged that the market still struggles to predict forward pricing with any precision, something he described as critical to long-term project viability. 

Dillon added that forecasting future carbon removal prices remains highly uncertain, with current estimates serving as broad directional indicators rather than settled market values. He pointed to the compliance market, currently valued at around £4 billion, with a working estimate of approximately £60 per carbon removal offered as a directional benchmark rather than a fixed market price. 

The day closed on a note about place as much as product. William Butler pointed to Scotland's deep expertise in forestry and land management as reason enough for Edinburgh to position itself as a genuine centre for nature credits, provided projects are treated as infrastructure, valued for social benefit the way other infrastructure already is. The one notably absent voice, several people observed, was the Scottish government itself. 

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