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Nov 23, 2023
Lockton P.L. Ferrari

Renewal Bulletin No. 11/23 - Club NorthStandard

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:



P&I mutual and fixed premium entries (Bluewater)


  • 5% increase in premium rates


  • All deductibles below US$30,000 will be increased by a minimum of US$1,000.


  • Release call at 12.5%


  • Members’ rates will be adjusted to incorporate any changes in the structure of the General Excess of Loss reinsurance programme.


FD&D entries (Bluewater)


  • 5% increase in premium rates


  • Maintaining the FD&D Rules deductible of 25%, with the minimum of US$10,000 per claim.


  • Release call at 12.5%


The Club noted during the recent board meeting that whilst a relatively favourable claims experience last year, there have been high value claims over US $1M this year. The investment performance in the year to date has also seen continued volatility, due to the war in the Ukraine and further geopolitical instability in other parts of the world. As a result, it was noted that the consequent impacton general claims and expense inflation worldwide added further complexity to claims forecasting.


Given the above, and whilst the board is focused on the need to support the Member, the Club considers that there is no doubt that inflationary pressures will continue to impact the claims experience next year, and therefore it was decided that responsible action needs to be taken to increase premium rating levels to contend with these inflationary pressures as well as the expect ed impact of rating churn on insurance premiums, and to preserve the financial equilibrium of the Club. Members with adverse Loss


Record will see their rates and terms adjusted to ensure that they make an equitable contribution.

Renewal Bulletin No. 11/23 - Club NorthStandard
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