New Energy Risk (NER), a wholly owned division of Paragon Insurance Group, and Ecostrat, a leader in assessing, developing, optimising, and managing biomass supply chains, have announced a partnership to develop Feedstock Supply Insurance© (FSI), an insurance offering that aims to mitigate risk in biomass feedstock supply chains.
It will do this by effectively capping feedstock costs and securing long-term project debt repayment obligations.
A key barrier to the rapid scaling of the trillion-dollar global bioeconomy is the fragmented nature of biomass supply chains, which often comprise small- and medium-size suppliers such as forestry companies, sawmills, farmers and truckers.
Bankable, long-term supply contracts are rare, and balance sheet project finance is therefore difficult. As a result, bio-project finance is slow, complicated and expensive.
Through the partnership between Ecostrat and NER, FSI aims to transform non-investment grade supply chains into bankable, investment-grade ones by transferring risk from project developers and capital providers to A-rated insurance markets.
This will strengthen the creditworthiness of backstops for biomass feedstock risk and help to guarantee key warranty obligations, such as debt repayment.
The expected outcomes of FSI include lower project debt costs, greater access to larger pools of capital and a more rapid scale-up of the global bioeconomy.
“As recognised leaders in our respective sectors, Ecostrat and NER are natural partners in creating this game-changing insurance product. Ecostrat’s state-of-the-science predictive analytics will identify failure modes and quantify impact, and NER will use these stochastic mathematics to provide underwriting capacity for feedstock insurance policies,” said Jordan Solomon, president and CEO of Ecostrat.
“Together, we will deliver a new tool to the market that will effectively securitise biomass supply chains and unlock much-needed capital for bio-manufacturing.”
“For over a decade, NER has supported the energy transition and circular economy by enhancing technology bankability. Many of our clients in the bioeconomy face the added challenge of bankable feedstock supply,” added George Schulz, managing director at New Energy Risk.
“Ecostrat has developed the tools and expertise required to assess this risk and we are excited to collaborate on solving this challenge with a novel insurance product, removing a key bottleneck in the sector’s growth. By mitigating supply chain risks and facilitating long-term financing, FSI will strengthen the viability of biobased projects, supporting its crucial role in achieving national renewable energy goals.”
New Energy Risk and Ecostrat create biomass feedstock insurance
