In a nutshell, what are the Poseidon Principles for Marine Insurance?
Launched in December 2021, the Poseidon Principles for Marine Insurance are first and foremost about transparency. Simply put, through the four principles of Assessment, Accountability, Enforcement and Transparency, the initiative provides an industry specific and robust framework for disclosing information about how business activities align with climate ambitions set by the IMO. The climate alignment scores calculated though the framework are a tool to benchmark and monitor progress towards IMO’s climate goals and are one element to help understand and support clients' decarbonisation efforts. As of February 2024, 10 signatories (marine insurers with hull and machinery portfolios) and nine affiliate members (insurance brokers and other collective groups in the marine insurance ecosystem) from nine countries have joined the initiative.
Why do insurers choose to become signatories?
Insurers choose to become signatories to demonstrate their commitment to transparency, decarbonisation, and responsible environmental stewardship in the maritime industry. By joining, insurers gain access to a community of like-minded organisations, emissions data insights, and tools to support clients in their decarbonisation journey while also building understanding of the risks associated with the net-zero transition.
What is the purpose of affiliate membership?
Affiliate membership is applicable for organisations whose current business activities support and contribute to the insurance ecosystem but fall out of the scope of signatory membership, such as insurance association, captives, unions and Protection and Indemnity (P&I) clubs. They play an essential role within the initiative, supporting clients and spreading the word through the industry.
The second annual disclosure report has been published on 25 January. What are the key take-aways?
The publication of the second Annual Disclosure Report highlights the ongoing commitment of marine insurers to transparency and decarbonisation efforts despite challenges faced by the maritime industry in 2023, including severe congestion at major ports, lack of personnel, inflation, and sanctions. The Poseidon Principles for Marine Insurance is still a new initiative, so this publication is a vital continuation of the journey signatories and affiliate members have embarked on to support the future of shipping together with their clients. The reporting process has highlighted the importance of affiliate members such as brokers in facilitating connections between insurers and clients through engagement and raising awareness about the initiative. The climate alignment scores indicate the need for continued efforts from both signatories and affiliate members. This second year of reporting also brought to light the understanding that scores are difficult to compare from one year to the next due to the changes within a portfolio. Looking ahead, the focus will be on incorporating the 2023 IMO GHG Strategy into the PPMI methodology, building on lessons learnt, refining the data collection processes, and expanding membership to further support the industry. You can learn more by viewing our recent webinar “Setting Sail Towards a Greener Future: Highlights from the 2023 Annual Disclosure Report”.
How can marine insurers support their insureds in the transition to decarbonisation?
It’s important that marine insurers play their role in the transition because the insurance industry is in a unique position to support decarbonisation and is at the forefront of understanding and mitigating climate-related risks. Natural disasters are among the top causes of marine insurance claims in both frequency and severity, with climate-related risks expected to persist and potentially increase. Moreover, as new fuel technologies emerge, there's a growing need to identify and mitigate associated risks, prompting collaborative efforts among insurance professionals, shipowners, classification societies and regulators to establish safety standards.
Initiatives like the Poseidon Principles for Marine Insurance provide valuable insights to support ongoing adaptation and refinement of ideas. By working together with their clients, marine insurers and other stakeholders in the insurance ecosystem can play a crucial role in enhancing the collective understanding of emerging risks, supporting continuous adaptation, and enhancing transparency in the dynamic landscape of maritime energy transitions.
What are the Poseidon Principles for Marine Insurance objectives for the future? Is there potential to expand their scope to other matters?
The Poseidon Principles for Marine Insurance stands ready to support the 2023 IMO GHG Strategy and collaborate with industry stakeholders to ensure the long-term sustainability of international shipping. In the next reporting cycle (the Annual Discourse Report to be published in early 2025 based on 2023 data), the scope will expand to include other types of GHG besides C02 (CH4 and N2O) and well-to-wake emissions, aligning with the IMO's revised ambition and upcoming guidance on the life cycle GHG intensity of marine fuels. This expansion will allow signatories to test proposed methodology updates on portfolio data and improve data accessibility while awaiting the final publication of life cycle emissions intensity guidance expected in Spring 2024.
Objectives for this year also include strengthening methodology and the data collection process and increasing membership of both signatories and affiliate members. It is the intent that over time and with increasing access to reliable data and information for public disclosure of climate alignment, the scope of the Principles will expand to include more affiliate members as signatories and other types of coverage. Additionally, the only environmental factor currently considered is climate alignment, but this could evolve in the future.
