ArgoGlobal Syndicate 1200 to exit most hull underwriting globally

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1^st January 2024.

The EU ETS is limited by a 'cap' on the number of emission allowances. Within the cap, companies receive or buy emission allowances, which they can trade as needed. The cap decreases every year, ensuring that total emissions fall.

Each allowance gives the holder the right to emit:

One tonne of carbon dioxide (CO2), or;
The equivalent amount of other powerful greenhouse gases, nitrous oxide (N2O) and perfluorocarbons (PFCs).
The price of one ton of CO2 allowance under the EU ETS has fluctuated between EUR 60 and almost EUR 100 in the past two years. The total cost of emissions will vary based on the cost of the allowance at the time of purchase, the vessel’s emissions profile and the total volume of voyages performed within the EU ETS area. The below is for illustration purposes:
~A 30.000 GT passenger ship has total emissions of 20.000 tonnes in a reporting year, of which 9.000 are within the EU, 7.000 at berth within the EU and 4.000 are between the EU and an outside port. The average price of the allowance is EUR 75 per tonne. The total cost would be as follows:
~~9.000 * EUR 75 = EUR 675.000
~~7.000 * EUR 75 = EUR 525.000
~~4.000 * EUR 75 * 50% = EUR 150.000
~~Total = EUR 1.350.000 (of which 40% is payable in 2024)
For 2024, a 60% rebate is admitted to the vessels involved. However, this is reduced to 30% in 2025, before payment is due for 100% with effect from 2026.
Emissions reporting is done for each individual ship, where the ship submits their data to a verifier (such as a class society) which in turns allows the shipowner to issue a verified company emissions report. This report is then submitted to the administering authority, and it is this data that informs what emission allowances need to be surrendered to the authority.
The sanctions for non- compliance are severe, and in the case of a ship that has failed to comply with the monitoring and reporting obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of an EEA port of entry may issue an expulsion order. Where such a ship flies the flag of an EEA country and enters or is found in one of its ports, the country concerned will, after giving the opportunity to the company concerned to submit its observations, detain the ship until the company fulfils its monitoring and reporting obligations.
Per the EU’s Implementing Regulation, it is the Shipowner who remains ultimately responsible for complying with the EU ETS system.

There are a number of great resources on the regulatory and practical aspects of the system – none better than the EU’s own:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en‍

Lloyd’s insurer and Argo Group subsidiary ArgoGlobal yesterday (September 2nd) announced plans to exit most of its hull underwriting business within Syndicate 1200. It said that recently recorded combined ratios were unsustainable.

Matt Harris, group head of international operations, said that “this is another step in our overall drive to increase profitability”, adding that “it is important to note; however, we are fully committed to the remaining marine classes we insure and insuring hull on non-Lloyd’s platforms.”

Argo said that Syndicate 1200 hull underwriting represented less than 3% of gross written premium in 2018. The company said that it would consider writing certain hull risks on a limited basis through Syndicate 1200 from Dubai. The syndicate already exited from the yacht market earlier this year. Syndicate 1200 will also exit underwriting operations in Asia. All existing policies remain valid and the company will manage claims handling through its London operation.

Harris said that “over the past two years, we’ve taken deliberate steps to improve profitability in Syndicate 1200 and ultimately enhance shareholder value. We’re executing this through underwriting actions, increased rates, and a focus on digital technology to improve underwriting margins. The ArgoGlobal Syndicate 1200’s Asia business recently recorded combined ratios are unsustainable and, whilst we still see growth opportunities in the region, we need to prioritize our efforts on profitable growth in other markets”. The Asia business accounted for less than 3% of Syndicate 1200 gross written premium in 2018.

The company said that these announcements would have no impact on Argo Group’s Ariel Re Syndicate 1910 business, including its growing Hong Kong-based renewable energy business.

Syndicate 1200 (Active underwriter S G Eccles) GWP in 2018 were £589.2m (from £552.6m in 2017). That would put hull business at less than £18m, according to Argo’s announcement. There was a loss of £35.9m in 2018, compared to a £112.3m loss the previous year. The combined ratio decreased from 131.8% to 107.7%.

In response to the events of 2017 the syndicate saw rate increases in short tail lines of business where it was most needed. However, Chairman Tony Latham said in the syndicate’s annual report that “rates did not return to a level commensurate with the risks being presented”.

Source: Insurance Marine News

ArgoGlobal Syndicate 1200 to exit most hull underwriting globally

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1st January 2024.

The European Union’s Emissions Trading System (EU ETS) was extended to cover emissions from shipping as of 1^st January 2024.