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Nov 10, 2021
Lockton P.L. Ferrari

General Increase Bulletin No. 9/21

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:

10th November 2021

P&I Mutual entries

  • A +12.5% general increase.
  • An increase of +10% on all expiring deductibles subject to a minimum of USD 2,500 for crew and cargo and a minimum of USD 7,500 for collision/fixed and floating objects.

  • FDD Mutual entries

  • A +12.5% general increase.

  • The results of the recent Board meeting and the general requirements set for the 2022/23 renewal can be summarised as follows.

    By way of background the club notes,
    “The club made positive progress at the last renewal towards its goal of breakeven underwriting. The board remains firmly focussed on achieving a sustainable underwriting result and increases in owners and members’ premium contributions are necessary at the 2022 renewal.”

    Whilst the 2021/22 policy year is seen to be performing better than 2020/21 it is still predicted to run with a combined ratio in the region of 115%. The main determining factors for this are identified as,

  • primarily due to the frequency and cost of large claims in the International Group Pool (the Pool) and Covid-related claims, but also reflects the general low level of premium rating across the industry. The first six months of the current policy year have seen a reduction in the frequency of other clubs’ Pool claims. However, the average value of these claims has significantly increased, generating claims estimates of a similar magnitude to 2020/21.
  • the investment portfolio remains defensively positioned and is not expected to offset the underwriting deficit.

  • Beyond the general increase to be applied on expiring P&I and FDD premiums and the deductible adjustments to be applied on P&I terms the club notes,

    “Additional costs in respect of the International Group excess of loss reinsurance programme will be passed to owners and members. Similarly, the cost of the club’s non-pool reinsurance programme has increased and indications are that it is expected to increase further into 2022/23.”

    This Newsletter, and our information archive, can also be accessed at

    P.L. FERRARI & CO S.r.l.

    General Increase Bulletin No. 9/21
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