Poseidon Principles issues first annual report

The Poseidon Principles for Marine Insurance (PPMI) has issued its first annual report, disclosing the climate alignment of leading marine insurers’ hull and machinery portfolios.

In the report, PPMI signatories publish data gathered from their clients to track the climate impact of their hull and machinery insurance portfolios. The goal is to enhance transparency and support the industry’s green transition.

Gard and did other leading marine insurers disclosed their climate alignments.

Rolf Thore Roppestad, Gard CEO and Vice Chair of the PPMI, noted that Gard’s performance was “better than average”.

Gard’s portfolio’s carbon emissions were however 8.3% higher than the IMO’s decarbonization trajectory, which aims for a 50% reduction in carbon emissions by 2050.

On average, the signatories’ H&M emissions were 12.7% higher than what they should be if they are to reach the IMO goal, and 20.8% higher than what would be needed to reach the more ambitious net-zero Paris Agreement.

The calculations were based on fuel consumption data from 2021, and did not cover the signatories’ entire hull and machinery portfolios.

Roppestad said that “we know there is room for improvement, both in our climate alignment score and in the data collection process itself, but that is why we wanted to be part of the Poseidon Principles for Marine Insurance. This is a journey we are on to learn and improve, and together with our clients, I am confident we will make the necessary progress”.

Patrizia Kern, Chair of the Poseidon Principles for Marine Insurance initiative and Marine Strategy Advisor – CEO Office at Swiss Re Corporate Solutions, said that “it is evident that there is work to do, but hard data and transparency is a necessary first step”.

The report noted that, at the end of the first year of the Poseidon Principles for Marine Insurance, some Signatories indicated that they would use their climate alignment scores to initiate constructive conversations with their clients to promote and support the transition of the shipping industry towards its decarbonization goal.

Additionally, some Signatories also recognized the need to keep on engaging with clients and partners in order to broaden the portfolio coverage in the future.

Some Signatories noted that the framework would help them reinforce their decision-making on risks and allow them to identify, adopt, and better inform their sustainable decisions and strategies.

Fidelis MGU, a founding signatory in December 2021, said that “it is not surprising that the first submission suggests our portfolio is not aligned with the relevant benchmarks. This clearly shows the need to engage with our insureds in order to ensure alignment in future”.

It said that in the first instance, “more work needs to be done to broaden the portfolio coverage of our climate alignment score to establish a more representative baseline”.

Fidelis MGU added that “with the first disclosure as a starting point we will (over the course of 2023) formulate an approach to aligning our portfolio with the required trajectory. This will align with our target setting process for meeting our broader net zero commitments”.

Navium Marine Ltd, a founding signatory as of March 2022, said that “it is clear that Navium has work to do with its clients to support the transition to net-zero emissions.”

Norwegian Hull Club observed that the “climate alignment” score was quite sensitive to errors in reporting and details in the applied methodology.

The Club said that “we need full transparency on the individual vessels’ global emissions for the following reasons:

  1. Transparency will benefit maritime transport in general and the best vessels in particular, as all other modes of transportation (air, road, rail) have higher emissions.
  2. Transparency will expose flaws in the reporting metrics, improve the quality of the reported data and reduce the administrative burden of everyone involved.
  3. Transparency will foster academic research on how to reduce emissions. This might result in less focus on individual vessels and more focus on effects of congestion, using the optimal type of vessels (large/small, bulk/container), optimising ballast voyages, optimise the mix between land/air/sea transport, reduce the overall need of transport and increase focus on the emissions involved in building vessels.”

Scor noted that “the Poseidon Principles for Marine Insurance have confirmed the difficulty to collect information throughout the value chain”.

Swiss Re Corporate Solutions said that “the attained climate alignment scores show that there is room for improvement and close and transparent collaboration with customers and brokers is key to curbing emissions and navigating the pathway to net-zero shipping”.

Victor Insurance observed that “as a new entrant into the Marine Hull market in 2021, this first year’s score is based on a relatively small vessel count. Nevertheless, it provides a foundation for further consideration and assessment in 2022. What is already apparent, however, is the stronger climate alignment features of more modern and up-to-date ships, especially those built since 2014.”

The insurer added that “necessarily, the first year’s climate alignment exercise is one whereby we are looking into the portfolio in arrears. The same pattern will be largely the case when we calculate our second annual score on the 2022 portfolio. Our next assessment will be based on a much larger portfolio of vessels and will provide a stronger basis for determining the impact on future decisions concerning the shape and size of our portfolio.”

Reporting Signatories were:

Fidelis MGU, Gard, Hellenic Hull Management, Navium, Norwegian Hull Club, SCOR, Swiss Re Corporate Solutions and Victor Insurance.