The Poseidon Principles for Marine Insurance (PPMI) got off the ground on Wednesday in the marine insurance industry's first coordinated move to promote shipping's decarbonisation.
PPMI is principally a hull and machinery insurance initiative, initially involving Swiss Re, Gard, the Norwegian Hull Club, SCOR, Hellenic Hull Management and Victor Insurance as founding members.
At this stage, the founders only account for a fraction of the marine insurance industry.
The programme also appears to be geared more towards assessing the aggregate performance of insurers' insurance portfolios, rather than regulating individual ship emissions performance.
PPMI is the insurance industry's version of the original Poseidon Principles established two years ago in the ship-finance sector.
Insureds with the six founding members of PPMI will be asked to provide data on their emissions performance in line with the International Maritime Organization's fuel consumption data collection system.
PPMI signatories will then assess their own portfolios for compliance with the IMO commitment to halve greenhouse gas emissions by 2050, and the Net-Zero Insurance Alliance target of net-zero emissions by 2050.
Hull and machinery insurance clauses are now being developed that will require shipowners to provide data on emissions to PPMI signatories.
Made contractual
"We will require that ongoing compliance with the PPMI is made contractual in all business activities using standardised covenant clauses," the grouping said in a statement.
PPMI signatories will only apply the monitoring to policies in which they are the lead underwriter.
The question is how much pressure will they be able to bring on shipowners to decarbonise?
Gard chief executive Rolf Thore Roppestad said the initiative allows underwriters to monitor the emissions performance of the hull and machinery portfolio as a whole.
He said it is not intended to apply enforcement measures against individual members.
"It is not a tool for accepting, or throwing out clients," he said.
He added that additional premium would not be charged to those who underperformed on curtailing emissions.
"Shipowners have started on the road to decarbonisation and our role is to support them in the process," he said.
Have a conversation
Asked what measures underwriters could take against a shipowner who underperformed, Swiss Re Corporate Solutions head of marine Patrizia Kern said the insurer would "need to have a conversation with the shipowner".
Hellenic Hull Management chief executive Ilias Tsakiris said PPMI would "help shipowners understand where they are heading, but it is not another regulation".
All the participants admitted the scheme needs further development. But Kern said it is important for the marine insurance industry to take a lead.
"It is important for us to contribute and to do the right thing," she said. "We take very seriously the role we will play in de-risking this transition."
The other issue is, while the likes of Gard, Norwegian Hull Club, Swiss Re and SCOR are big names in the world of marine insurance, they still only represent a fraction of the world in marine insurance capacity.
Ongoing discussions
Roppestad said he is proud of the standing of the founding PPMI members, but more members will be required.
Kern said there are ongoing discussions with seven Lloyd's of London syndicates on signing up with the PPMI. Industry association International Union of Marine Insurance is an affiliate member.
Scandinavia, a leading marine insurance region, is well represented at PPMI and the Nordic Association of Marine Insurers (Cefor) is also an affiliate member.
But, as yet, there is no support from the Far East, where China and Japan are major sources of hull and machinery underwriting capacity.
Protection and indemnity mutuals are also absent. International Group of P&I Clubs chief executive Nick Shaw said the group has been involved in the PPMI discussions and its future relationship is under consideration.
Under consideration
"The International Group is currently considering whether to seek to obtain a formal mandate from its shipowner stakeholders via the 13 individual clubs in respect of PPMI," he said. "The International Group and its constituent clubs will, nevertheless, support their shipowner members where possible through the transition to alternative fuels."
The other issue is whether shipowners that come under the PPMI scheme are simply being asked to duplicate data they are already providing to the Poseidon Principles banking initiative.
The leading banks all make hull and machinery insurance cover a requirement of ship finance.
