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Dec 29, 2021
Lockton P.L. Ferrari

Renewal Bulletin No. 16/21

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:

28th December 2021

Upon the conclusion of the announcements for general renewal requirementsissued by the Clubs of The International Group for the forthcoming renewal at 20thFebruary 2022 we provide herein the summary headlines for each of the clubs.

We will follow up with our next and last renewal bulletin reporting any change in thecost, or structure, of the International Group reinsurance programme.

P&I A +12.5% minimum increase
FDD A +12.5% minimum increase

P&I No declared general increase with Members continuing to be Underwritten individually, the Board has however targeted a 12.5% increase on expiring ETC premium. Minimum deductibles will be increased to the following levels,

• Crew USD 6,000
• Cargo USD 18,500
• All Others USD 12,500

FDD No declared general increase but Members’ rates willbe adjusted to reflect their individual claims records and risk profiles to achieve a 15%increase on expiring ETC premium.

P&I No general increase ordered, but Members can expectan increase in the ETC for Owners mutual P&I.
FDD No general increase ordered

P&I A 10% general increase on expiring advance callpremiums
FDD A 10% general increase on expiring advance callpremiums

P&I No general increase ordered however the Board istargeting an increase in rates of +12.5%, this issubject to a focus on individual Member lossrecords and risk profiles.
FDD No general increase ordered however the Board istargeting an increase in rates of +12.5%, this issubject to a focus on individual Member lossrecords and risk profiles.

P&I A +15% general increase. All Owned deductibles below US$ 50,000 increasedby a minimum of US$ 2,500 per deductible exceptfor crew and other people related claims below US$50,000 which will be increased by a minimum of US$5,000 per deductible.
FDD A +7.5% general increase.

P&I A 5% general increase. The increase will be inclusive of any adjustment forreinsurance premiums.
FDD A 5% general increase.

P&I A minimum market adjustment of +10% for all mutualP&I tonnage regardless of performance
FDD A minimum market adjustment of +10% for all mutualP&I tonnage regardless of performance

P&I A +12.5% general increase. An increase of +10% on all expiring deductiblessubject to a minimum of USD 2,500 for crew andcargo and a minimum of USD 7,500 forcollision/fixed and floating objects.
FDD A +12.5% general increase.

P&I A +12.5% General Increase on expiring premiumsA +10% increase in Class 1 P&I deductibles toapply to all deductibles which are US$ 100,000 orless.
FDD A +12.5% General Increase on expiring premiums

P&I A +12.5% general increase
FDD A +15% general increase

P&I A +12.5% general increase

FDD A +7.5% general increase

P&I A +15% standard surcharge. No change to the Rules Deductible for Class 1entries however all other deductibles will beincreased by 15% and a minimum increase ofUS$ 2,500 will be applied.
FDD A +15% standard surcharge

Note: Unless otherwise noted all Clubs will be passing on to Members any cost adjustment of the tariff based GXL Reinsurancemarket placement as at 20th February 2022.

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

Renewal Bulletin No. 16/21
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