Lloyd’s expects to pay £6 billion in Covid losses

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 expects to pay £6 billion in Covid losses – and reports a 0.9 bn pre-tax loss for 2020

Lloyd’s has announced its Preliminary Results for the period ending 31 December 2020 on 31 March 2020, and has issued the following statement:

“For 2020, Lloyd’s is reporting a pre-tax loss of £0.9bn, driven by £3.4bn net incurred COVID-19 losses adding 13.3% to the market’s combined ratio of 110.3%.

Throughout 2020, Lloyd’s has provided critical financial support to our customers, with COVID-19 claims pay-outs expected to reach over £6 billion. Although the majority of claims are yet to be reported, the market has responded at pace, having already paid out two thirds of the £2bn claims reported to date.

Excluding COVID-19 claims, our 2020 results demonstrate solid underlying progress having embarked on a three-year journey to improve performance. The market’s underlying combined ratio has shown substantial improvement over the past three years, dropping to 97.0% in 2020. This represents a 5.1% improvement on 2019 (102.1%) and a 7.5% improvement on 2018 (104.5%). The attritional loss ratio has also improved by 5.4% to 51.9% when compared with 2019.

Furthermore, we have achieved a £1.9bn improvement in underwriting earnings from a loss of £1.1bn in 2018, to a profit of £0.8bn in 2020 (excluding COVID-19). Over the same period, the market has achieved year-on-year rate increases of approximately 10%, whilst shedding approximately 20% of the worst performing business. This is tangible evidence that the performance measures introduced over the last three years are beginning to bite.

Lloyd’s balance sheet remains exceptionally well capitalised post COVID-19, with total resources standing at £33.9bn and a central solvency ratio of 209%. Our excellent financial strength is further evidenced by Lloyd’s strong financial strength ratings which are A+ (Strong) stable outlook with Standard & Poor’s, A (Excellent) stable outlook with A.M. Best, AA- (Very Strong) with Fitch Ratings.

Notwithstanding the challenges 2020 has brought, these results demonstrate the positive impact of Lloyd’s sustained performance improvement measures and a strong return to profitability. “

Full details of the Lloyd’s market 2020 Full Year Results can be found on the Lloyd’s website https://www.lloyds.com/annualresults2020

SOURCE: LLOYD’S OF LONDON

Lloyd’s expects to pay £6 billion in Covid losses

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.