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Nov 9, 2023
Lockton P.L. Ferrari

Renewal Bulletin No. 01/23 - Club Steamship

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:

02nd November2023

P&I mutual entries

•5% General increase for the policy year 2024/25.

•No projected changes in deductibles.

•USD 25 million capital distribution subject toregulatory approval, equal to approx. 7.5% of premium.

•Total Club assets at USD 1.3 billion, producing a2.6% investment return of USD 33 million.

•2024/25 Release Call set at 10%

FD&D entries

-5% General Increase.

-No changes in deductibles.

-2024/25 Release call set at 10%.

The recent Board meeting recognized the need forcaution when projecting claims levels, whilst underwriting performance for thefirst six months in 2023/24 has been satisfactory. Considering these and otherfactors, the Board decided that there will be a general increase of 5% inpremium ratings for all classes of business. In addition, and as always, rateswill be adjusted to correct individual premium record, where necessary, and toreflect any changes in the cost of the International Group reinsuranceprogramme.

The Club renewal circular sets out the main highlightsfrom the Clubs operating environment which were considered when deciding thegeneral increase requirements:

  • The Club’s own     claims for the 2023/24 policy year at six months are less than budgeted.
  • There were     four International Group (IG) Pool claims which were reported by other     Clubs for the 2023/24 policy year, and which exceeded Club retention in     the period to 20 September.
  • Prior year     claims are developing satisfactorily with reserve releases.
  • As a result of     favourable claims projections, the 2023/24 financial year combined ratio     is better than expected at six months.
  • An investment     return of US$33 million achieved for the first seven
  • The Club’s S&P Global (S&P) rating is ‘A’     with a stable outlook.
  • As a result of favourable claims projections, the     2023/24 financial year combined ratio is better than expected at six months.
  • An investment return of US$33 million achieved     for the first seven months.
  • The Club’s S&P Global (S&P) rating is ‘A’     with a stable outlook.
  • In the year to 20 October, owned tonnage has     increased by 3.6% to 120.6 million GT.
  • At the 2024/25 renewal there will be a 5% general     increase applied to premium on all classes of business.
  • Subject to     regulatory approval, there will be a capital distribution to Members     equivalent to 7.5% of the 2023/24 mutual P&I premium for renewing     vessels. This amounts to     approximately US$25 million.


Renewal Bulletin No. 01/23 - Club Steamship
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