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Oct 7, 2010
Lockton P.L. Ferrari

Ferrari hot on the P&I circuit

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

A Genoa-based insurer celebrates 50 years with ambitions to step on the gas.

It has only just turned October but already the pace of life at PL Ferrari is gearing up for yet another renewal of protection-and-indemnity (P&I) cover.
The Genoa-based company which has strong claims to be the world’s first P&I broker recently turned 50 but remains ambitious and is looking for growth beyond its Mediterranean heartland.
If Ferrari was a P&I club rather than a broker it would be the sixth biggest as it places cover on a more than 2000-ship fleet of almost 70 million gt that pay premiums approaching $240m.
For most of the half century since the company was founded by Pier Luigi Ferrari it has been independent although it spent eight years as part of the big Aon broking empire before a team of 10 senior executives launched a management buy out (MBO) that took the company private again.
The MBO in late 2008 coincided with the financial market meltdown and a bank retreat from lending but the deal was still completed.
Despite this inauspicious timing Ferrari has continued to prosper.
Managing director Federico Deodato a former ship’s officer who has spent over 30 years with Ferrari says the fortunes of the business are tied up with its clients so it was a worrying time.
“If shipowners are doing well we do well but if they suffer we also suffer” said Deodato.
But fortunately Ferrari is more exposed to the recovering bulk-shipping sectors and less to the hard-hit container trade.

Deodato says he is “reasonably optimistic” as conservative budgets were set charterers’ business held up and Ferrari is doing fine.
“In 2008 we worried about 2009 and then about 2010 but we now see 2011 as a pretty crucial year.
“But we have a nice growth curve consistently up each year. We don’t have a desire to grow exponentially. We are happy with steady growth
“The MBO business plan is on track but you don’t become rich doing this business. Overheads are a lot higher than elsewhere but you can make a reasonably good living out of it if you are prepared to work 10 or 12 hours a day” added Deodato.
The Ferrari management team is still in the office in the evening and many come in at the weekend to squeeze in a few uninterrupted hours.
It is a very service-intensive business with half of the 67-strong team working on claims with the figure rising to 80% if other servicing functions are included.

According to Deodato this service focus is the real secret of Ferrari’s success.
“P&I is completely different to other areas of the insurance business. Most people perceive a P&I broker as someone transacting business but there is a lot more to it. The service commitment is vital” he added.
“It is a big cost and it is something you come to terms with but a big broking group would struggle with the dynamics of such a service-intensive business” he said.

An impressive list of shipowner clients validates Ferrari’s approach. In Italy there are three D’Amatos both D’Amicos and both Bottiglieris as well as D’Alesio Augustea Coeclereci ENEL ENI Ignazio Messina Moby Premuda Saipem the Seaarland-Zacchello companies as well as the Grimaldi group including wider ventures controlled by this Naples-based owner such as Finnlines Minoan Lines and ACL.

Beyond Italy Ferrari places cover for companies that include ¿V Ships Metrostar Avin International Oceanbulk Paragon Diana Shipping Iolcos Starbulk Stealth Hellenic Carriers Scorpio Tankers Globus Emirates Besiktas Karahasan Stellar Shipping SMT Fal Shipping Lukoil CNAN and Acemex.
“Turnover of clients is basically non-existent. We feel this vindicates the focus on service” said Deodato

But Deodato also reveals there is also an edge to the business that keeps it at the top.
“If we feel we might lose something we will fight like street dogs to keep it” said Deodato
So where will Ferrari be in five or 10 years’ time?
Deodato sees it as a very similar business to now but significantly larger with a wider geographical reach.
Italian owners now account for less than 50% of Ferrari’s activities with Greece and Monaco each producing about 12% of the business.

The Russian market was also important around 2005 with Ferrari placing cover for about 700 vessels but it has since declined as a source of business.
An agreement has just been made with Swiss hull broker Sipex to open a joint office in Turkey from the New Year.
There is an established Ferrari presence in Naples and a recent move into London with the recruitment of prominent P&I broker Stephen Hawke from Aon.

Despite the importance of the Far East shipping market Deodato thinks exporting the Ferrari service concept might be a step too far so growth is more likely to be in the Middle East Northern Europe or perhaps Spain.
There is a historic understanding with Genoa-based hull-insurance broker Cambiaso Risso that they will co-operate but not stray into each other’s speciality with the deal cemented with a 10% cross shareholding and a director from each sitting on the other’s board.

Ferrari will however still stick to its philosophy of remaining a specialised P&I broker and not be tempted into hull or other areas of insurance.
“That we don’t do anything other than P&I is a strong point in terms of developing relationships with other brokers. We are always open for the right commercial relationship” he added.
At 54 Deodato is the oldest of the MBO partners although most of the Ferrari managers are 20 or 30-year veterans of the business.

There is no MBO exit plan that involves selling Ferrari and collecting the proceeds.
“This is not part of the business plan but another 50 years of independence is” Deodato adds.
The concept is instead that Ferrari will be run like a professional partnership with the stakes of retiring shareholders bought back and redistributed to up-and-coming members of the team.

By Jim Mulrenan Genoa
Published: 20:04 GMT 06 Oct 10 | updated: 20:04 GMT 06 Oct 10

Palatial premises live up to reputation
Every office should have one. When PL Ferrari’s protection-and-indemnity (P&I) palazzo gets a little too hot at the peak of the Italian summer staff and clients can retreat to the Nymphaeum.

If you are unfortunate enough to be reading this in premises without even the most basic of grottos you can only envy the watery temple that lies at the base of Ferrari’s “office”.
PL Ferrari is one of the classiest of P&I brokers and their premises certainly live up to this reputation.
The firm occupies the Villa Pallavicino delle Peschiere a palatial 16th century summerhouse built for one of Genoa’s ruling families.

The talk may be about the many things that go wrong when ships go to sea and how insurance can at least mitigate some of the problems.
But there are no paintings of ships on the wall or ship models.
Instead there is total immersion in another world with walls and ceilings richly decorated with classical scenes.
It is a magnificent place to do business but the palazzo has a few snags such as the need to improvise with ideas such as running computer cables down chimneys.

By Jim Mulrenan Genoa
Published: 20:04 GMT 06 Oct 10 | updated: 20:04 GMT 06 Oct 10

Transatlantic loss inspired first P&I steps
The tragic loss of the pride of the Italian fleet in 1956 the passenger liner Andrea Doria was fresh in shipowners’ minds when Pier Luigi Ferrari took his first steps in the protection-and-indemnity (P&I) world.

The 29000-gt Andrea Doria (built 1953) sank after colliding with the 12000-gt Stockholm (built 1948) off Nantucket in the last of the great transatlantic liner disasters.

It was potentially another Titanic disaster but 1660 passengers and crew were rescued and only 46 lives were lost. The Stockholm incidentally is still afloat as the Portuguese cruiseship Athena.
More than half a century later Ferrari is still to be found in the chairman’s office at the palatial Villa Pallavicino in Genoa with the 71 year old having no timetable to retire.

Ferrari was the son of a manager of the Generali insurance group who in the wake of the Andrea Doria loss thought the developing world of marine liability cover looked interesting and proposed his 19-year-old son go to London and find out about P&I.
It was inspired thinking as Italian owners were also becoming aware of their liabilities and receptive to Ferrari’s approach.
There has always been a rivalry between Ferrari and Rotterdam-based Post & Co over who was the very first P&I broker. But Ferrari is convinced he was and still has the Standard Club commission note that gave him three farthings a ton for the very first vessel he placed with the club in 1959.

The 7176-gt war-time Liberty Ship Honestas owned by Ausonia di Nav dei Fratelli Ravano di Alberto was only insured from 1 June to the 20 February renewal so Ferrari was paid 264/365ths of the annual commission — the magnificent sum of £16 4s 5p in the pounds shillings and pence of Britain’s pre-decimalisation currency.
The Genoese have a reputation for being careful with money so it was second nature for Ferrari to show his clients that he looked after their lira as though it was his own. For many years he would buzz around on a Vespa scooter sometimes with a portly English club underwriter clinging to the pillion seat. And then when he traded up it was not to a sporty red number from Maranello but to a small black Fiat saloon.

Ferrari’s entire adult life has centred on P&I from his initiation in the business with former Standard Club chief Colin Harris and brothers Cyril and Dawson Miller whose family at the time ran both the UK and Standard clubs.
There used to be a small Genoa P&I club Sindacato Internazionale but Ferrari always favoured the English-managed clubs and frequently travelled by train (on a second-class ticket) and ferry to London.

The idea of Ferrari creating his own P&I club has been suggested by a number of shipowners over the years but the broker was never seriously tempted.
Ferrari says he always thought rivalries between owners meant it was better to be insured with foreigners.
In the early days his entire business fitted into a brief case but he gradually signed up bigger owners some with fleets of 25 or more ships and then he made a breakthrough into the big time winning Italy’s state-owned tanker fleet. By his late twenties he was firmly established as a P&I broker.

The advice he got from Harris paid dividends with as much as 85% of his business in the early days being placed with this club although he later diversified and used the UK Club Steamship Mutual North of England Gard and everyone else.
Many of his clients from the early days such as D’Amato and Deiulemar are still Ferrari accounts today.

By Jim Mulrenan Genoa
Published: 19:59 GMT 06 Oct 10 | updated: 19:59 GMT 06 Oct 10

Antitrust investigation puzzles broker
A top broker such as PL Ferrari might benefit from the market turmoil that might accompany the break up of the International Group P&I cartel.

But the prospect of such an outcome to the European Commission (EC)’s current antitrust investigation of the International Group is not something that Federico Deodato or his colleagues relish.
“We are strongly supportive of the International Group structure. It would be crazy to destroy something that is serving the shipping industry so well” said Deodato.

The broker finds the decision in Brussels to launch an investigation almost puzzling.
“This is something that concerns the authorities more than the actual customers the shipowners” he adds.

Ferrari nails its colours to the P&I club mast with the launch of the broker’s market review somewhat ominously entitled “Still Waters”.
There are indications that the EC is taking an interest in the high release calls that the clubs set to allow shipowners to move to other clubs.

But Deodato says the concept of a release call is now wrong in itself.
“If there is a problem it is that the message from the clubs should be coherent. If finances are strong and claims stable why should a club need a high release call?” he noted.

Deodato compares discontent about release calls to football where complaints about referees are often down to a lack of consistency rather than the rules of the game.
Still waters is a reference to superficially calm seas but with a number of threats lurking beneath the surface.

These include the claims trend where a downturn may be due to reduced shipping activity rather than an end to claims inflations or other change in the underlying environment.

The broker also sees convention-driven liabilities rising technology advances making wreck recovery in even the deepest waters more likely and identifies an upward trend in higher value pool claims as a reason for “excessive optimism” to be avoided.
The Ferrari market report estimates the general increase in prospect at the February 2011 renewal will be in the zero to 5% range but should really be higher at up to 10% as there are still clubs that need to take remedial action over underwriting deficits.

Ferrari is also forecasting that there will be specific attention on deductibles at the renewal and also more focus on individual records rather than the general environment.
But the broker argues that there is a need to revalidate terms so that the raising of deductibles is matched by logical premium discounts.

Ferrari calculates that at the February 2010 renewal the 13 International Group clubs achieved a pure premium increase of 2.4% against a target of 3.2% and suggests the difference is more likely to be changes in deductibles and other terms rather than weak underwriting.
The figures broadly fit with the clubs achieving a year-on-year increase in premium of 6.62% against a background of a tonnage rise of 4.25% and average P&I premiums rising from $3.11 per gt to $3.386 per gt an increase of 2.4%.

A feature of the Ferrari review is that much of the comparative data for the different clubs are displayed on similar scales to permit easy comparison.

By Jim Mulrenan Genoa
Published: 20:06 GMT 06 Oct 10 | updated: 20:06 GMT 06 Oct 10


Ferrari hot on the P&I circuit
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