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Nov 23, 2022
Lockton P.L. Ferrari

Renewal Bulletin No. 09/22 - Club American

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:

23rd November 2022

  • A supplementary call of 30% of currently estimated total premium for the 2021policy year be applied to both Class I (P&I) and Class II (FD&D) for all openentries at 30th Sept 2022.
  • All expiring estimated total premium to have no standardized general increase forboth Class I (P&I) and Class II (FD&D) insurance.
  • However, given the inflation and hostile trends in the claims environment, theimplementation for 2023 of a year-on-year increase in the pricing risk of at least10% on expiring rates overall has been decided.
  • All deductibles from $10,000 to $50,000 per claim will be increased by 10%, andany below the $10,000 threshold will be increased in all cases by $1,000.

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:

  • The impact of inflation continues to be evident across a broad spectrum ofexposure, particularly in regard to people and environmental claims.
  • The COVID-19 pandemic has also continued to exert a negative influence onclaims for the 2020 and 2021 policy years, the latter year having been unable totake the benefit of reinsurance protection for such claims following the withdrawalof cover by market underwriters at the 2021 renewal.
  • Notwithstanding, the increases in premium obtained at the last renewal haveraised the Club’s overall income levels on its mutual P&I portfolio substantially tohave a healthy growth in tonnage both organically on existing accounts and by theaddition of new business.
  • Also, Eagle Ocean Marine (EOM), the Club’s fixed premium facility, has continuedto make a strong contribution to the mutuality, with steadily rising premium andcontinuingly favourable underwriting results.
  • While the Club’s investment in American Hellenic Hull has struggled to achieveprofitability, it has been able to consolidate its position in the market as part of theenlarged portfolio of the Club’s European subsidiary, the American Club (Europe),in Cyprus.

Against this background and in addition to the above-mentioned renewalrequirements, the Club has decided the following:

  • The component of premium represented by the Club’s International Groupreinsurance arrangements for 2023 to be adjusted separately and additionally.
  • Additional cost relating to Club’s own reinsurances will also be adjustedseparately and additionally.
  • All Fixed Premium P&I and Damage to Hull (DTH) entries to have nostandardized, or general increase.
  • All fixed premium FD&D entries to have no standardized, or general, increase.
  • Subject to these general conditions, and as discussed above, Members’premium rates and terms of entry for 2023 will be assessed by reference totheir own particular circumstances, including their loss records, vessel-type,trade and regional factors, as well as other relevant matters, including theconsideration of Members’ individual risk profiles, in consequence of which further adjustments may be made as appropriate.

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. 09/22 - Club American
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