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Nov 4, 2022
Lockton P.L. Ferrari

Renewal Bulletin No. 03/22 - 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:

4th November 2022

  • No General Increases would be applied across the Membership.
  • A 10% increase in premiums would be applied in the Yacht sector.
  • Increases would be applied as required to Members operating Dry Cargo vessels.
  • All adjustments would be inclusive of any additional reinsurance costs that may apply.
  • All deductibles under US$ 50,000 would be increased by 10% but subject to a minimum monetary increase of US$ 500.

At the recent Board meeting, the Club has considered its financial position and decidedthe renewal requirements as above. In addition, the Club circular sets out the mainhighlights:

  • At the half year stage, the Club reported a Combined Ratio of 96.2%, with anunderwriting surplus of US$ 4.3m.
  • Both claims from the Club’s Membership and to the International Group Pool havebeen lower than expected which has offset the impact of inflation.
  • However, there has been a steady increase in the level of claims from the yachtsector including a number of significant claims in the superyacht sector from theClub’s Membership.
  • Inflation will be influential and increases in reinsurance costs for the next year willbe expected.
  • It has been a significantly challenging year for the investment, but the Clubremained well capitalised and that the majority of financial losses remained un-realised.
  • The Managers will review Members’ claims records and operational risks, whenapplying commensurate adjustments in premiums and terms where appropriate.This may include further adjustments to deductible levels.

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

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

P.L.Ferrari – A Member of the Lockton Group of Companies This newsletter is intended solely as an overview of the marine market and does not constitute any form of advice. It is based on sources believed to be accurate at the time of printing andwe cannot be held liable for the omission of any information within the newsletter.

Renewal Bulletin No. 03/22 - Club Shipowners
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