The Poseidon Principles for Marine Insurance (PPMI) formally came into effect in May 2022, and the Signatories are getting ready to begin their first climate alignment reporting exercise, meaning that they will publicly disclose the carbon intensity of their hull and machinery (H&M) portfolios.
As with all new initiatives, however, many are wondering about the practicalities. What will it mean for our clients? How will emissions data be collected and what will they eventually be used for? Gard’s PPMI expert and Head of Analytics, Sigvald Fossum gives the answers.
Poseidon Principles in practice
The Poseidon Principles is a framework that piggybacks the IMO DCS reporting so it will use the same data that is being used for IMO reporting. What will happen in practice, is that insurers will approach clients where they have claims lead on the H&M cover and ask for their fuel consumption data.
Going forward, standard clauses will be included in all H&M policies allowing us to ask for this data each year, and until then, we will send data consent letters to each client serving the same purpose.
We have worked hard to ensure that this process will be as smooth and straightforward as possible from our end, but among Signatories (across banks and insurers) there are also great efforts to finetune the process. For instance, this year, a common reporting template will be introduced, and other streamlining and efficiency measures are also being looked into.
What about using modeled emissions data instead? Wouldn’t that be easier than having to approach each individual client for their data?
Yes, in theory. However, a core principle of the PPMI is accountability, meaning that we are expected to use verified, real, data. Besides, if different Signatories use different models, we risk ending up with different results for different ships, giving an inaccurate reflection of actual emissions. That could be solved by all Signatories employing the same model, but we also know that ships’ fuel mix will change in the years to come, so models will likely struggle to keep up with developments. We think it is important that we capture the real picture.
That said, this is an ongoing discussion, and it might be that the use of modelled data will suit certain settings or sectors that want to get involved but for practical reasons can’t. At this stage, the data collection process is the most demanding part of the reporting exercise – both for our clients and for us. We are very keen to find a better solution. This could come in different shapes or forms, including getting access to data from IMO DCS directly or a central repository for all Poseidon Principles data.
Once the data is collected, what will it be used for? Will fleets with higher emissions get higher insurance premiums?
The data will be analysed and disclosed on an aggregate level, focusing not on individual clients or specific fleets, but on our H&M portfolio as a whole. We will not report who our clients are or the vessels in our portfolio, but exclusively the climate alignment of our overall portfolio. We are not going to exclude members and clients based on this.
The PPMI is not about targeting specific clients, it’s about working together and increasing transparency. Our company mission is to be supportive to shipowners in their decarbonisation journey rather than to impose anything on them.
And what about pricing?
When it comes to commercial decisions and pricing, we first need to fully understand and analyse the data before we can start exploring such possibilities. It is important that we understand KPIs before we implement them and we are not there yet.
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