CircularsNews
January 2013

2013/14 IG 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

Dear Sirs,

The International Group Clubs Group Excess Reinsurance programme for 2013/14 has now been finished and is as follows. As circulated before, the new pool retention will start from $9 million instead of $8 mil. of the 2012 year. As new, the excess point on the reinsurance contract will be increased from $60 million to $70 million.

The following reinsurance rates concern limits in excess of $70 million up to $2,070 million.

2013/14

2012 rate

2013 rate

USD PER GT

USD per GT

Difference

USD PER GT

DIRTY TANKERS

0.6515

0.7565

0.1350

+%16.12

CLEAN TANKERS

0.2798

0.3245

0.0447

+%15.98

DRY CARGO VESSELS

0.3561

0.4942

0.1381

+%38.78

PASSANGER VESSELS

1.3992

3.1493

1.7501

+%125

We would like to give an example how the increased cost will apply. Increase of cost for a dry cargo vessel of 10,000 gt will be 10,000 gt x $0.1381 = $1,381

Within the above reinsurance programme there is the US$10 million retained within the Group pool reinsured by the Group captive Hydra for US$40m excess US$30m. In addition, the Hydra coinsurance share in the first layer of the Group General Excess of loss (US$500 million excess US$70 million) will be increased from 25% to 30%.

For 2013/14, a three layer pool structure will be introduced with a lower pool layer from US$9 million to US$45 million, an upper pool layer from US$45 million to US$60 million (within which as currently there is a claiming club retention of 10%) and an upper pool layer from US$60 million to US$70 million (within which there is a claiming club retention of 5%).

US Oil Pollution Surcharge

Reflecting the continued improvement in the record of the dirty tankers sector, there will be a further reduction in the US oil pollution voyage surcharge of 15%.

No items found.