Can Insurance Successfully Address Reversal Risk in Carbon Markets?

This paper examines whether insurance can credibly address the shortcomings of existing reversal mechanisms. Drawing on lessons from property insurance against wildfire risk and the World Bank Group's CDM-era products, it identifies the key design features and limitations that will determine whether insurance can meaningfully contribute to managing reversal risk. The paper also reflects insights from the CMM-WG workshop held on 12 March 2026, which convened insurers, programme experts, and policymakers to debate the path forward.