Insurers Adopt Poseidon Principles for Decarbonization Transparency
In an effort to keep the focus on the shipping industry’s progress towards decarbonization, six of the leading insurance companies for the maritime industry are launching an initiative designed to encourage the industry and provide a further level of transparency on carbon initiatives. Called the Poseidon Principles for Marine Insurance, it represents the second expansion of the Poseidon Principles launched in 2019 that enlisted maritime financing and financial institutions in addressing global environmental issues.
Launched in Europe today under the auspices of the Global Maritime Forum, an international not-for-profit organization committed to promoting sustainability in global seaborne trade, the committee that developed the new charter says that the Poseidon Principles for Marine Insurance are a framework to quantitatively assess and disclose the climate alignment of marine insurers’ underwriting portfolios. In addition to the leading insurers and related organizations, members from the shipping community, including A.P. Moller-Maersk and Star Bulk as well as Lloyd’s Register, participated in the effort.
“We are pleased to see leading marine insurers join forces with signatories to the Poseidon Principles and the Sea Cargo Charter in establishing a framework to quantitively assess and disclose the climate alignment of their underwriting portfolios, and raising the bar for everyone by doing so relative to the goal of full decarbonization of international shipping,” said Johannah Christensen, CEO at Global Maritime Forum in support of the new initiative. “Alongside other stakeholders in the maritime value chain, the insurance industry has the influence and responsibility to drive progress.”
After the financial industry launched the Poseidon Principles, charterers followed suit with their initiative inspired by the same guidelines. Announced in October 2020, seventeen of the leading charterers committed to transparency showing the alignment of their efforts with the shipping industry’s decarbonization. The Sea Cargo Charter set a benchmark for responsible shipping and transparent climate reporting is seen as a tool to use charters to drive the shipping industry’s decarbonization progress.
Signatories to the new Poseidon Principles for Marine Insurance, which include as founders Swiss Re, Gard, Hellenic Hull Management, SCOR, Victor International, and Norwegian Hull Club, commit to assessing and disclosing the climate alignment of their hull and machinery portfolios. Under the new principles, they will benchmark their portfolios against two trajectories. One is linked to a 50 percent reduction of annual CO2 emissions by 2050 compared to 2008 and the other is linked to a 100 percent reduction of emissions by 2050.
“As risk managers, insurers and investors, the insurance industry has a key role in supporting the transition to a net-zero economy. The Poseidon Principles will serve our institutions as well as our clients to quantitatively assess and disclose the climate alignment of their underwriting portfolios and thus improve decision-making at a strategic level and shape a sustainable future for all. The disclosure framework provided by the Poseidon Principles will enable us to credibly report our progress towards net-zero insurance using granular marine data,” said Patrizia Kern, Marine Head at Swiss Re Corporate Solutions and Chair of the drafting committee for the Poseidon Principles for Marine Insurance.
The Poseidon Principles for Marine Insurance is also the first sector-specific methodology to emerge in support of the UN lead Net-Zero Insurance Alliance (NZIA) which was launched in the summer of 2021. Eight of the world’s leading insurers and reinsurers established the alliance where members commit to transitioning their underwriting portfolios to net-zero GHG emissions by 2050.
The group plans to continue to expand the framework to further support a zero-emissions future for the shipping industry. They said they planned to add a third trajectory to the principles to align the full decarbonization trajectory with zero-lifecycle GHG emissions to meet the ambition of net-zero commitments such as the NZIA. In addition to the six founding members, brokers and other key stakeholders in marine insurance are committing to supporting the principles as affiliate members and aligning with the goal of decarbonizing international shipping by 2050. Affiliate members supporting the principles are Willis Towers Watson, Cefor, and EF Marine, and additional marine insurers are expected to join in the future.