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January 2011

2011/12 InternationaL Group of P&I Clubs Group Excess Reinsurance programme

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:

‍https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0087-20230605

‍https://climate.ec.europa.eu/eu-action/transport/reducing-emissions-shipping-sector_en

‍https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/what-eu-ets_en‍

Degerli Ilgili,

Grup Klupleri 2011/12 poliçe yili için ortak aldiklari reasürans program sonuçlarini açiklamistir. Öncelikle yeni senede 13 grup klubunun ortak istirakleriyle karsilanan hasarlar (pool claims) üst limiti hadise basina $50 milyondan $60 milyona yükseltilmistir.  Söz konusu $10 milyonluk artis Grup Kluplerinin sahip oldugu Hydra Insurance Company Ltd.’e sigortalatilmistir. USD60 milyonu asan ve üst limiti $3,060 milyon olan ortak reasürans (Group Excess Reinsurance) programinda ise asagidaki iyilestirmeler elde edilmistir. Uluslararasi Grup Klupleri Alt Komitesi yaptigi açiklamada 2008/9/10 poliçe yillarindaki hasarlarin beklenen seviyelerden düsük olmasi sebebi ile bu sonuca ulasildigini belirtmistir. Söz konusu farkliliklar yenilemede üyelerin prim seviyelerine gt x önceki yila oranla beliren fark (USD) bazinda yansiyacaktir.

Dear Sirs,

The arrangements for the renewal of the International Group General Excess of Loss reinsurance contract and Hydra reinsurance programme for 2011/12 have now been finalized. There will be rate reductions for all vessel categories and a further reduction in the US oil pollution voyage surcharge.

Furthermore, the Group has decided with effect from 20 February 2011 to increase the excess point on the GXL contract from US $50m to US $60m. The resultant additional US $10m of retained risk within the Group pool will be 100% reinsured by the Group captive, Hydra Insurance Company Ltd (increasing the Hydra pool reinsurance layer to US $30m xs US$30m).This increased Hydra participation in the Group reinsurance arrangements is consistent with the strategic objectives and the rationale underlying the development of Hydra which commenced operations in 2005 and which has since reinsured 100% of the US$30m - US$50m Group pool layer and 25% of the first layer of the Group GXL program (US $500m xs US $50m). Hugo Wynn-Williams, Chairman of the International Group Reinsurance Sub-Committee, reported that there has been significant improvement on prior year claims deterioration and that the favourable claims picture for the 2008/9/10 policy years is reflected in the renewal terms negotiated with the Group’s reinsurers for 2011.

2011/12

DIFFERENCE TO PREVIOUS YEAR

USD PER GT

%

USD PER GT

DIRTY TANKERS

0.7038

-6.83

0.0516

CLEAN TANKERS

0.3055

-8.40

0.0280

DRY CARGO VESSELS

0.3709

-4.09

0.0158

PASSANGER VESSELS

1.7480

-5.58

0.0874

PERSISTENT (DIRTY) TO

0.0711

-5.58

0.0042

NON-PERSISTENT TANKER

RATE PER GT

US Oil Pollution Surcharge – 2011 Policy Year

Non-SBT (US$)

SBT(US$)

(A) Tankers of more than 1,000 GT

- per ton per voyage

0.068  

0.0566

LOOP/Lightening

- per ton per voyage

0.034  

0.0283

(B) Tankers of 1,000 GT or less:-

either per voyage

or per annum  

68

1,360

57

1,140

(C) Parcel tankers carrying less than

5,000 metric tons of persistent oil as cargo

- per voyage    

204

170

(D) Parcel tankers carrying 5,000 - 9,999

metric tons of persistent oil as cargo

-  per voyage

510

425

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