APAC insurers weigh carbon capture growth as cross-border risks, liability gaps test underwriting

Rising carbon capture and storage (CCS) activity across the Asia Pacific is lifting insurance demand, as developers and investors increasingly view risk transfer as essential to securing finance for larger projects, though cross-border risks and liability gaps continue to constrain the market.

Insurers say demand for CCS cover is growing as large projects take shape in markets such as China and Australia, and soon, Malaysia.

“There is growing interest in insurance solutions that can support these investments with clarity and confidence,” said Thordis Jensen, Head of ESG Risk Solutions International at HDI Global. 

Currently, the market is broadly split into two main categories: the more established engineered CCS, where carbon is captured from industrial sources and stored, and nature-based CCS, a newer risk area where forests, mangroves and other ecosystems are used to absorb and retain carbon.

In engineered CCS, Japan, South Korea and Australia are among the most developed markets, supported by clearer policy frameworks and more established storage options. According to SCOR, investment in engineered CCS across the region is projected to reach about US$600bn by 2050.

“There is growing interest in insurance solutions that can support these investments with clarity and confidence.”

Thordis Jensen

Head of ESG Risk Solutions International at HDI Global

Demand is also rising for nature-based CCS solutions as companies place greater weight on ecosystem health, biodiversity and natural capital resilience in their transition strategies. This is especially relevant in Asia, which holds about 30% of the world’s forested land and the world’s largest mangrove ecosystems.

“These trends collectively drive greater demand for insurance—both to make CCS projects bankable and to de-risk corporates’ long-term investments in nature-based and engineered CCS solutions,” said Adeline Chua, Head of Product Development & Innovation in APAC at SCOR.

While Europe and North America remain the primary investment targets, interest in newer markets across APAC is rising as governments build infrastructure and develop regional storage capacity, according to a new survey by Marsh. About 38% of respondents identified Southeast Asia and the Middle East as key destinations for CCS investment, while pointing to the Pacific (26%) and China (25%) as well.

“These trends collectively drive greater demand for insurance—both to make CCS projects bankable and to de-risk corporates’ long-term investments in nature-based and engineered CCS solutions.”

Adeline Chua

APAC Head of Product Development & Innovation at SCOR

Transport, storage as most insurable segments

Insurability today is concentrated in CO₂ transport and geological storage, largely because they resemble risks already long familiar to insurers from oil, gas and offshore energy.

“Transport and storage remain the most insurable components today, drawing on decades of established operational experience in the regional energy sector,” Jensen said.

According to the Global CCS Institute, APAC currently has 23 commercial carbon capture, utilisation and storage (CCUS) facilities, providing insurers with early operational data to support risk modelling and product development.

Even so, insurance demand remains muted while many CCS projects are still in pilot or early development.

“We’re not yet seeing significant demand for insurance placement,” said Angelo Maniatis, Head of Risk Engineering at Liberty Asia Pacific. “But as more projects mature into the construction and operational phases, we expect this to change.”

As CCS goes cross-border, risks multiply

Cross-border carbon transport and storage is expected to shape the next stage of CCS development in APAC, insurers say, as emitters look beyond domestic markets for viable long-term storage options.

Japan is likely to be a central force in that buildout. Five projects offering a capacity of between 2 and 5 million tons per year are already in the pipeline, and the country is projected to become Asia Pacific’s third-largest CO₂ capture market by mid-century, accounting for nearly 68% of cross-border CO₂ storage demand.

Singapore is also emerging as a key enabler, putting in place the legal and political frameworks needed to export captured CO₂ for storage overseas.

“From an insurance perspective, yes there is capacity, but there’s also inherent complexity when underwriting a single project that spans multiple legal and regulatory jurisdictions.”

Angelo Maniatis

Head of Risk Engineering at Liberty Asia Pacific

But as CCS value chains stretch across borders, underwriting becomes more complex. Cross-border projects bring added friction around liability, regulation and contract design.

“From an insurance perspective, yes there is capacity, but there’s also inherent complexity when underwriting a single project that spans multiple legal and regulatory jurisdictions,” Maniatis said.

Similar problems emerge for nature-based CCS projects. Indonesia and Malaysia hold much larger natural carbon sinks, while Singapore and Japan have limited domestic sequestration capacity. As a result, credits are often generated in one country, bought in another, and verified by international third parties.

This creates its own governance, liability and measurement, reporting, verification (MRV) challenges. But unlike engineered CCS, the risks are tied to biological systems rather than geological storage, making reversal risk and long-term permanence harder to manage.

Long-term liability remains the largest protection gap

Significant coverage gaps also remain across the engineered CCS value chain, particularly around long-term storage liability and technology performance risk. 

Main technical concerns include CO₂ leakage from storage sites or infrastructure, contamination from off-spec carbon entering shared transport systems, business interruption across linked CCS networks, and environmental damage that could trigger long-tail liability.

These exposures can extend decades beyond the operational life of a project, making them difficult to price and fit within traditional insurance models. The challenge is further compounded as CCS infrastructure becomes more networked.

“This is critical in APAC, where CCS hubs and major emitters are expected to form interconnected networks – increasing the potential for cascading impacts,” Jensen said.

Underwriting remains cautious, for now

Across the market, insurers say capacity for CCS risks is generally sufficient, but deployment remains selective as underwriters contend with limited loss data, evolving regulation and still-maturing project structures.

That is translating into tighter policy wording, layered programme structures, heavier use of engineering and geological expertise, and more selective risk appetite.

Insurers are also working more closely with clients, brokers and risk engineers to better understand how these exposures are developing and to refine coverage as projects move forward.

Over time, confidence in the market is expected to improve as operational experience builds, regulation becomes clearer, and the market develops a firmer view of how risks should be shared.

“The growth potential of CCS in the region will depend on continued collaboration across governments, developers, brokers and insurers to align frameworks, define roles, and build confidence as the market evolves,” said Johanna Winarjo, Assistant Underwriter, Energy for Asia at AXA XL.