Insurance & Risk Management

Carbon forests face real risks. Fire, storms, disease, and other events can destroy trees and create financial liabilities. Understanding and managing these risks is part of responsible carbon farming.

Key Risks

Fire

The biggest risk for exotic plantations:

Storm and Wind

New Zealand is exposed to severe weather:

Disease and Pests

Various threats affect different species:

Other Natural Events

Financial Impacts

When forest is destroyed, you face:

Carbon Liabilities

Under stock change accounting, destruction means surrender obligations. Even under averaging, if you can’t replant, liabilities arise.

The temporary adverse event exemption helps — but you still lose future income while the forest recovers.

Lost Future Income

Destroyed forest can’t earn units. Even with exemptions, you face:

Direct Costs

Post-event costs include:

The Temporary Adverse Event Exemption

What It Does

The TAES provides relief for forests damaged by natural events:

Limitations

The exemption doesn’t cover:

It prevents punitive surrender liabilities but doesn’t make you whole.

Qualifying

To qualify:

Insurance Options

Traditional Forestry Insurance

Standard forestry insurance covers timber value:

This doesn’t directly address carbon liabilities, but timber insurance provides some financial buffer.

Carbon Liability Insurance

Specialist products covering ETS surrender liabilities are available from select providers:

Coverage options:

Specialist providers: Sage Partners designed New Zealand’s first carbon credit-based forest insurance policy and now insures approximately 70% of carbon-based forestry insurance in NZ. They offer tailored policies for both plantation timber owners and “lock up and leave” native forest carbon farmers.

Coverage typically includes:

Since the TAES exemption was introduced, demand for pure surrender liability insurance has decreased. However, LOFE coverage remains valuable — TAES exempts you from surrender but doesn’t replace the years of lost income while your forest recovers.

Current Market Reality

As of 2025:

If insurance is important to your risk management, shop early and widely.

Risk Mitigation Strategies

Fire Prevention

Practical measures:

Planning:

Storm Resilience

Site selection:

Forest management:

Disease Management

Prevention:

Response:

Diversification

Don’t put all eggs in one basket:

If one area is affected, others continue earning.

Financial Risk Management

Unit Reserves

Hold some NZUs as a buffer:

Cash Reserves

Keep financial buffer for:

Staged Selling

Selling units over time reduces:

Contract Terms

In aggregation or marketing agreements:

Risk Assessment

Before registering, assess:

Site Risk Factors

Regional Risk Factors

Management Risk Factors

Insurance Checklist

If you’re seeking insurance:

  1. Understand what you’re insuring — timber value, carbon liability, or both?
  2. Get multiple quotes — market is thin
  3. Check exclusions — what’s not covered?
  4. Understand deductibles — your first loss exposure
  5. Review annually — coverage needs change
  6. Document everything — photos, records, maps

Key Takeaways

  1. Real risks exist — fire, storm, disease can destroy forests
  2. TAES helps but doesn’t make you whole — exempts surrender but not lost income
  3. Insurance market is limited — fewer options than for general forestry
  4. Prevention beats cure — manage risks actively
  5. Diversification matters — spread risk across sites and time
  6. Hold reserves — units and cash buffer

Next Steps

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