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Nov 6, 2024
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Lockton P.L. Ferrari

Renewal Bulletin No. 02/24 - GARD

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

P&I MUTUAL ENTRIES

-         4% premium increase on ETC for the 2025 renewal

-         10 % owners’ general discount (OGD) on an Estimated Total Call (ETC) basis for vessels renewed by Members with Gard for the 2025 policy year

-         There were no reported changes in the deductibles

FD&D ENTRIES

-         No premium increases were reported in this respect

-         There were no reported changes in the deductibles

 

Following the recent meeting in Bermuda, the Board of Directors of the Gard Club in November 2025, please find below the detailed highlights and developments:

Financial strength:

-         The Gard Club continues to be well capitalised and its financial rating remains strong with an A+ (stable outlook) rating by Standard and Poor’s; the highest of any P&I club in the International Group of P&I Clubs.

Premium adjustments:

-         The Board is satisfied with the Association's mutual P&I portfolio, which is currently priced competitively. However, as the Mutual P&I product develops, the Board wants to ensure that the Association maintains the Mutual P&I portfolio with only a small estimated loss. Premium adjustments will therefore have to be applied to maintain predictability and stability in the portfolio. In light of the above, the Board has decided to apply an average premium increase of 4% to ETC for the 2025 renewals.

-         In addition, in view of the strong capital situation the Board agreed a 10% owners’ general discount (OGD) on an Estimated Total Call (ETC) basis for vessels renewed by Members with Gard for the 2025 policy year. In 2025, Gard will mark its 16th consecutive year of returning capital to its mutual members.

Investment Performance:

-         With good overall performance by the investments, the Club has maintained and built a solid base to meet future developments of the insurance portfolio.

 

Underwriting Results:

-         The Board observed that the Club has demonstrated a strong insurance performance over the past decade. Despite the inherent volatility in the business lines, the overall insurance result at the Club level has remained stable in comparison to its peers.

-         The 2024 policy year was underwritten with a 10% Owners’ General Discount (OGD) on the ETC.

 

Release Calls:

-         The Board has decided to maintain the level of release calls as follows:

2022: 5%

2023: 5%

2024:10%

2025: 10%

Renewal Bulletin No. 02/24 - GARD
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