Shipowners must upgrade their vessels to comply with updated global sulphur emission norms to avoid losing their classification and insurance cover, marine insurance providers and underwriters cautioned the industry recently.
The International Maritime Organization (IMO) has set a new global sulphur emission cap of 0.5%, down from the current 3.5%. Enforcement in individual jurisdictions will be monitored by member countries. The new cap will be in force by 2020.
The stricter standard is expected to affect the global merchant fleet of over 85,000 ships, as well as the maritime industry in general, including insurance, classification, finance, and credit.
“Non-compliance with class regulations may ultimately lead to suspension of class, which in turn [can] have an impact on the insurance policies,” a Singapore-based executive at a global marine insurer told
S&P Global Platts.
“The ship has to be class approved in order to get an insurance cover,” a Belgium-based senior executive at a P&I club added, stressing the importance of retrofitting and upgrading of vessels’ engines.
Various classification societies will conduct inspections to ensure that ships’ equipment comply with IMO regulations.
In recent years, the number of ships has grown tremendously, causing a surplus that made freight rates cheaper. This reduced shipping firms’ ability to take out insurance cover, eating into underwriters’ margins.
While the effect of the new sulphur emission regulations on insurance is not yet clear at this point, experts say that insurers will feel it, especially with high-value claims. New regulations are likely to cause higher maintenance and training costs for shipowners, with new equipment that must be insured.
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