Marine Insurance Markets open for business

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

The outbreak of COVID-19 has become a pandemic, and most of us are affected in one way or another. But as we take the necessary precautions to weather this new and unfamiliar situation, there are crucial functions to society that cannot stop. The shipping industry is very much among these functions, and our clients have important roles to play in the upcoming months. We would therefore like to assure everyone that the marine insurance industry remains open for business, and we remain available at all times to serve our clients’ needs.

The global nature of Marine Insurance has inadvertently prepared our operations for a situation like this. The distances have made us fully digital, and Lloyd’s successfully tested their electronic emergency trading protocols last Friday, 13 March, which has allowed it to now close the Underwriting Room with effect from Thursday 19 March. We cooperate seamlessly between our offices in Scandinavia, in the UK, on the European Continent and in Asia, as well as with our business partners worldwide, without delay. Our clients should expect no less than the excellent service they are used to.

While our clients can expect business as usual in terms of service, there will be consequences of this virus that affect their insurances going forward. Our product portfolio contains several products that protect against interruption caused by illness, pandemics, quarantines, etc. This is now unavailable for new inquiries, and we expect this to be a topic of discussion in upcoming renewals. Events relating to the current outbreak of COVID-19 will be specifically excluded, and cover for consequences such as increased waiting time for spare parts will likely be capped. It is to be expected that the marine insurance business adapts to a changing environment.

These past months and weeks have presented challenges on a scale we have not seen for a very long time. We are pleased to report that our markets stand firm and that the systems we lean on work as they should. Insurances should not be among our clients’ concerns right now. That is what we are here for, and we will help our clients through this crisis, and prepare for whatever comes next.

Our competent team of risk experts are at your service, you can find their full contact details by following these links to respectively our people, practices or offices.

Marine Insurance Markets open for business

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.