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Nov 9, 2023
Lockton P.L. Ferrari

Renewal Bulletin No. 02/23 - Club Shipowners

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:

7th November 2023


P&I mutual entries

  • 5% General increase for the policy year 2024/25.
  • No changes in deductibles would be applied.
  • The Club reported a combined ratio of 98.5%, with an underwriting surplus of US$ 1.8m


FD &D entries

  • 5% General Increase.

  • No changes in deductibles.


The recent Board meeting noted that the Club remained in an excellent position, despite no General Increase having been applied for 2023. However, claims in the 2023 year were running at a significantly higher level than in previous years, partly dueto the impact of inflation. Despite this, the Board were pleased to note that this should not, for 2023 at least, put the Club into a negative underwriting position. Mindful of the impact of inflation on the cost of claims going forward the Board resolved that a 5% General Increase should be applied for2024 with the exception of Yachts sector. Dry Cargo, despite the 10% increase in 2023 as for Yachts, will maintain the 2024 General Increase to assist in improving it further to an acceptable level.


The Club renewal circular sets out the main highlights from the Clubs operating environment which were considered when deciding the general increase requirements:

  • Balanced against a higher level of claims, the level of income we derive has increased. This has been achieved from a mixture of new business, organic growth and from targeted premium increases from the Dry Cargo and Yacht sectors to address the performance in these specific areas.

  • From an investment perspective the year to date has been favourable, a positive investment result is therefore expected, and so the Club expect to continue to see steady growth in the number of Members, vessels and gross tonnage during 2024.

  • At the half year stage, the Club reported a combined ratio of 98.5%, with an underwriting surplus of US$ 1.8m, compared with 96.2% and US$ 4.3m at the same stage of the prior year.

  • Inflation will continue to be influential in terms of overall claims costs, some increases in reinsurance costs must also be expected. The Club will continue to target a break. The Club will continue to target a break--even combined ratio, providing ongoing stability and cover to Members at cost.
Renewal Bulletin No. 02/23 - Club Shipowners
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