‘Poseidon Principles' for marine insurance scheme in development

Marine insurers are being invited to sign up for a Poseidon Principles-style scheme that will commit them to annual declarations of the carbon footprint of their customers, it was announced at the International Union of Marine Insurance (Iumi) conference.

The call from Johannah Christensen, chief executive of the Global Maritime Forum (GMF), was delivered online, following the decision to hold the annual Iumi event virtually on account of the coronavirus pandemic.

The initiative already has the backing of some of the big names in the sector, including Swiss Re, Gard and Cefor, she said.

Christensen outlined the progress of the Poseidon Principles, launched in 2019 to bring ship finance on board with the industry decarbonisation agenda, and the 2020 Sea Cargo Charter (SCC), which aims to do likewise for cargo owners and charterers.

The Poseidon Principles started with 11 banks as signatories, which promised to integrate climate considerations into lending decisions, in what was hailed as a groundbreaking development at the time.

It now has 27 backers and published its first annual disclosure report last year.

Only three of the 15 participants that reported the carbon footprint of their portfolio were fully aligned to targets, but most were making progress in that direction. 

The first annual disclosure report from the SCC is due next spring.

While the  Poseidon Principles and the SCC use different evaluative methodologies, they are designed to mirror one another in terms of structure, including the alignment of business activities with climate concerns; accurate and unbiased information; standardised enforcement for all stakeholders; and public and timely disclosure.

Now the GMF is working on a sister-scheme for marine insurers, based on a traffic light scoring system to highlight the extent of alignment with International Maritime Organization (IMO) decarbonisation goals.

“Earlier this year we commenced working on a Poseidon Principles-equivalent for the marine insurance sector,” Christensen said.

“The purpose of the new initiative is to assess climate alignment in marine insurance and for insurance companies in the marine space to support their clients in the transition to decarbonised shipping,” she added. 

A drafting group has been at work for eight months and while technical details have not yet been finalised, the plan is to develop a framework designed to inform decisions and incentivise insurers actively to drive solutions.

It will be limited to hull and machinery insurers in the first instance, with the intention of expanding it to take in other covers in due course.

Alignment will be assessed on decarbonisation trajectories, and how well they fit IMO goals and, ultimately, the Paris agreement, implying ultimate total decarbonisation.

The conference also heard earlier from Roel Hoenders, head of air pollution at the IMO.

Hoenders pointed to a decoupling of carbon dioxide emissions from trade, with trade volumes up even as emissions fell. This, he argued, was encouraging, but still not good enough.

The IMO agreed what he described as an ambitious greenhouse gas strategy in April 2018, which comes with two levels of ambition.

The 2030 level of ambition is to reduce shipping’s carbon intensity by 40% from a base year of 2008. But carbon intensity improved 20% to 30% in the 10 years from 2008, making that a low bar.

Accordingly, the 2050 level of ambition will be tougher, with meetings later this year to agree targets.

The immediate regulatory agenda will focus on the safe and sustainable use of new marine fuels, including ammonia, biofuels, methanol and hydrogen.

It will feature a lifecycle assessment approach to greenhouse gas emissions, going beyond “tank to propeller” phrase to take in upstream emissions, Hoenders said.

This article first appeared in Lloyd's List, a sister publication of Insurance Day