Marsh offers tax insurance to support American clean energy investing

Tax insurance - Clean energy investing

Marsh has announced its new solution to help boost available capital for investing

Marsh recently announced the launch of its new tax insurance solution that it is calling its Tax Investment Default Insurance.  It is a new solution created to boost available capital for investments into federal tax credits associated with renewable energy projects in the United States.

The new solution is meant to promote renewable energy investments

As the Inflation Reduction Act of 2022 increasingly supports efforts such as clean energy and a hydrogen economy in the United States, Marsh has launched its new tax insurance solution to promote investments into precisely the types of projects receiving this government support.

Tax insurance - Inflation Reduction Act 2022 - Incentive

The Inflation Reduction Act brought new tax incentives to companies in the United States focused on renewable and clean energy project development. Developers are able to transfer future tax credits to investors without affecting the project’s equity divisions. Transferring tax credits makes it possible for developers to keep cash ready for early-stage project development. On the other hand, financial institutions and other buyers are able to obtain future credits to offset the taxes they pay to the federal government.

The issue overcome by the tax insurance

Though the opportunity from the Inflation Reduction Act seems appealing, project lenders usually require prospective tax equity or credit investors to tick some strict boxes in terms of financial strength for investment. Though this has offered developers high-quality capital access, it has also restricted the investment pool as many investors simply do not meet the credit rating requirements.

The new tax insurance solution was created to protect developers against default risk if a tax credit investor cannot or will not fulfil their financial obligations once they have received their credits.

Reassurance to lenders

Through this strategy and coverage, lender concerns are assuaged, letting them confidently accept tax investors who would otherwise have been excluded.

This new tax insurance policy is supported by Everest Insurance®, among other A-rated underwriters.

The product’s launch has occurred at a time in which there has been a substantial increase in the number of Marsh’s customers that have been seeking coverage to protect their renewable energy credit investments against the risk that authorities will disallow or reduce them.

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