How does CORSIA insurance work? Six Q&As

Oka is a Lloyd's of London syndicate that wrote the carbon market's first double-counting insurance policy – Corresponding Adjustment Protect – back in 2024, since which it has insured more than $300mn in CORSIA credits. To help airlines and other CORSIA market participants understand how CORSIA insurance works, Oka’s Chief Product Officer Stewart Duncan joined Abatable's Juan Carlos Arredondo Brun on 17 September 2026 to discuss how the guarantee behind a CORSIA eligible emissions unit actually works.

Here we’ve broken down six Q&As from that conversation, drawn from the areas attendees were most interested in.

Watch the full recording of the session here.

1. Why does a CORSIA unit need a guarantee at all?

CORSIA, the Carbon Offsetting and Reduction Scheme for International Aviation, is a global market-based mechanism designed to compensate for the growth of international civil aviation emissions above a 2019 baseline.  

One of the principles of the CORSIA scheme is that any eligible emissions unit (EEU) retired by airlines is properly accounted for as compensation of emissions in the international airspace, and not against the emission-reduction targets of the country hosting the emissions-reduction project or activity. To that end, a host country must authorise, through a Letter of Authorisation (LoA), the use of the EEU towards CORSIA, also identified under the United Nations Framework Convention on Climate Change (UNFCCC) as Other International Mitigation Purposes (OIMP). 

The LoA issued by a host country states the country's commitment to properly account for the unit by ultimately recording the CA in its national climate mitigation results. In practice, a CA implies discounting or deducting the CORSIA authorised unit from the mitigation achieved towards a national target. For transparency on the global accounting of units, any authorisations issued by a country must be communicated in national transparency reports to the UNFCCC – known as Biennial Transparency Reports (BTRs) – and be publicly available. If a transparency report does not include the authorisations and does not express or describe the CAs, then it is assumed that the units used for CORSIA are at risk of being double-counted.  

To prevent such risk, eligible crediting programmes require project proponents seeking CORSIA eligibility of their units to follow one of two pathways:  

1. Provide evidence that the CA has already happened, in line with authorisation, and is reported in the BTR;

2. Where the CA has not yet been applied, provide an approved guarantee that covers the risk of authorisation revocation and double-counting units until the CA happens. 

Depending on the crediting standard, an acceptable guarantee can be a contribution to a double-counting or authorisation revocation buffer pool or an insurance policy that covers for double-counting risk. This is most commonly arranged as a deed backed by an approved insurance policy (Oka’s Corresponding Adjustment Protect was the first private policy approved by registries Gold Standard and Verra) – ensuring that any double-claimed units are replaced.

The second route is necessary because BTRs are submitted only once every two years; meaning airlines may need to buy and retire units before the CA can be confirmed. The guarantee therefore bridges the timing gap, unlocking earlier supply while protecting against the risk that the CA is ultimately not applied. There are different reasons this may happen: the CA may never be applied or reported; its application may be delayed relative to the CORSIA compliance cycle; or the host country may revoke its original authorisation for the units to be used towards CORSIA. Any of these can lead to double-counting of units, and guarantees provide a way to replace or substitute the double-counted units.

A host country stating in an LoA that it won't revoke the credits under question doesn't remove the need for a guarantee. Government administrations change, and a host country can miss a CA through administrative capacity rather than intent, which is the more likely failure mode.

2. Who buys the insurance, and who carries the liability?

The carbon project developer for both, with the insurance policy supporting the obligation and the eligible carbon-crediting standard or programme acting as administrator. 

This is deliberate market design. The project developer is entrusted with obtaining the LoA from the host country government, signing a deed of undertaking with the eligible standard committing to replace any credit that fails, and contributing to the standard’s buffer pool or buying the insurance policy to cover the double-counting risk. 

Oka, as the approved CORSIA insurer, sits behind that commitment as the balance sheet to pay out for the replacement or substitution of units. The developer remains responsible for the underlying replacement obligation and for maintaining the policy, while Oka’s insurance product itself must meet the relevant programme’s approval criteria. This means the adequacy of the insurance policy is assessed before the units are labelled for CORSIA.

Airlines participating in the CORSIA scheme do not buy a policy of their own. Their role is limited to reporting and verifying annual emissions, buying CORSIA-eligible units, which must be labelled and properly identified as such in the standard’s registry, and then retiring the units to comply with CORSIA compensation obligations. The double-claiming remediation mechanism is already in place, having been established between the standard, insurer, and developer before the CORSIA tag appears in a registry.

3. What happens when a Corresponding Adjustment fails?

The eligible standard holds the responsibility for monitoring and obtaining evidence on the application of CAs by host countries. Each standard checks for issuance of LoAs, confirms if LoAs conform to UNFCCC Article 6 guidance on authorisations, and checks national transparency reports for LoA listing and the application of CAs. This role is part of their International Civil Aviation Organization (ICAO) eligibility requirements.

If the eligible standard determines the CA has not been applied or there is no credible evidence of its application within a certain time after the adjustment was due, it issues a demand notice to the developer to replace or compensate for the double-counted unit. The developer must then buy and retire a replacement CORSIA-eligible emissions unit, supported by the insurance policy. 

Oka pays the developer the cash value of the CORSIA credit at the time of loss, or can procure a replacement unit directly from the market if agreed between the parties. The replacement unit does not have to come from the same project, but it must be CORSIA-eligible. It can be from any other CORSIA-eligible supply option valid for the compliance cycle. 

The airline does not take part in the resolution process directly. Say an airline already retired a CORSIA unit, and that unit later turns out to have been double-counted. The airline wouldn't need to buy replacement credits itself. Instead, the developer, the insurer, and the standard handle the substitution among themselves, and the original unit's serial number stays the same throughout.

Corrections run as an administrative process and the standard informs the UNFCCC and ICAO of the situation with the country. Any instance of double-counting can lead to a revision of the risk classification of the host country, or the standard even ceasing to designate units from that country as CORSIA eligible.

4. What’s the payout?

The insured value is a stated value chosen by the project developer when acquiring its policy rather than set by the insurer or by the market on the day of default. Typically, the price per unit stated in the policy would be higher than market prices. Developers tend to price on the high side to leave themselves a margin, as any failure to compensate or replace units would expose them to additional liability.

Standards check that figure specifically to ensure there is enough cash available to buy replacement units if something goes wrong. Insurers check it too, and push back with their own transaction data where a figure reads as underinsured. 

Insurance policies are getting better price reference points from market operation. As more units are issued and authorised for CORSIA, more developers are contracting policies. An increasing number of CORSIA transactions are providing market prices that become a reference; similarly, CORSIA Futures contracts and forward delivery of eligible units are starting to appear in the market, giving underwriters a clearer view of replacement prices.

5. Is there enough CORSIA-eligible supply to guarantee replacements?

The flexibility built into the replacement windows, which run for years rather than weeks, is what makes a shortfall recoverable.

Supply sufficiency has been the main concern since the CORSIA market opened. The supply prospect today is different to CORSIA's early days as an increased number of carbon projects and unit issuances are coming to the market for authorisation and are subject to becoming eligible.

Over the last 20 months, eligible CORSIA supply grew from 7.6 million units available in January 2025 to 41.9 million by August 2026, with more than 50 LoAs issued to date backing up those volumes. Growth happened mainly during 2026, when the CORSIA eligible supply more than doubled. 

The main bottleneck is host-country authorisations, not a shortage of eligible projects or insurance capacity. There are over two thousand carbon projects registered with eligible standards, many already holding units from eligible vintages and which have not yet requested an LoA. 

As the CORSIA scheme progresses, more countries are open to issue LoAs and authorise units, in line with the support expressed by a significant number of ICAO members during ICAO’s 42nd Assembly, and the approach to compliance followed in some regions. Several stakeholders are collaborating with the aviation sector and country government representatives in support of the scheme's success. For instance, the International Air Transport Association (IATA) launched a global alliance for CORSIA supply to pool participants' resources and target supply bottlenecks, with tailored, pragmatic implementation assistance.

A pressing question is whether the number of authorisations will increase at scale in the next 14 months, on time to satisfy the estimated First Phase demand of around 200 million units before the compliance deadline of January 2028.

6. What are the penalties for CORSIA non-compliance?

Penalties are set nationally. Each participating state writes CORSIA requirements into its own regulations, with enforcement by its civil aviation authority or related government ministry. For instance, the United Kingdom has four regulatory agencies for CORSIA, with civil penalties for non-compliance set in the Air Navigation Order 2021. Similarly, Brazil’s National Civil Aviation Agency (ANAC) oversees CORSIA compliance under Resolution Number 743, which defines penalties. So the penalties an airline faces for missing the January 2028 retirement deadline depend entirely on where it's registered. 

Penalties and enforcement currently vary materially by jurisdiction. Some states already have explicit monetary sanctions, while others are still completing implementation. As countries are building their CORSIA regulatory regimes against the CORSIA’s Second Phase from 2027, an airline's exposure to non-compliance may be reputational until specific penalties are defined.

What does this all mean for airlines?

It’s sensible to start engaging with the market now, even if at small volumes and not yet at the full CORSIA exposure. 

From a market-wide perspective, a wait-and-see stance by airlines could be detrimental. Lack of engagement from participating airlines would not send a demand signal to host countries, leaving countries with no reason to authorise units and risking a market stall. Airlines that transact early get to test their own CORSIA procurement machinery, from exposure calculations by sustainability and operations areas to budget allocation by the finance function, and the legal and commercial structures their teams have drafted.

In this process, airlines face the opportunity to refine their approach. A specific lesson from the CORSIA procurement events Abatable has run over the past eight months: Initial airline conversations came from jet fuel procurement teams applying jet fuel procurement practices, unaware of how CORSIA units originate, their availability or timeframes. 

CORSIA procurement doesn’t behave the way fuel procurement does. Fuels can be guaranteed at a named airport on a named date. A CORSIA unit depends on issuance, then authorisation, guarantees or CAs, followed by CORSIA labelling, so delivery arrives in weeks, months, or years, not necessarily in days. Procurement practices and contracts need to reflect that reality.

Watch the full webinar recording here, and find out more about Abatable’s CORSIA procurement, advisory and intelligence offerings here. Click here for more information on Oka’s CORSIA policy.