The IMO is the United Nations’ specialised agency with responsibility for the safety and security of shipping and the prevention of marine and atmospheric pollution by ships. The IMO approved an initial GHG strategy in April 2018 to reduce GHG emissions generated by shipping activity. This strategy sets out the following levels of ambition:

1. 1. To reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008.
   2. To reduce CO2 emissions per transport work by at least 40% by 2030, pursuing efforts towards 70% by 2050 compared to 2008.

Five years later in July 2023, the IMO revised its strategy, formally known as Resolution MEPC.377(80) or the 2023 IMO Strategy on Reduction of GHG Emissions from Ships (2023 IMO GHG Strategy). The ambition is to reduce total annual GHG emissions to net-zero around 2050 in a well-to-wake CO2e perceptive. It also takes into account interim checkpoints in 2030 (20% reduction, striving for 30% compared to 2008 levels) and 2040 (70% reduction, striving for 80% compared to 2008 levels). Work is ongoing in 2023 to align the current Poseidon Principles for Marine Insurance trajectories with this revised ambition.

According to the IMO, the sector currently accounts for 2.2% of global emissions. Left unchecked, shipping emissions are expected to grow by 50-250% by 2050. While CO2 represented almost all of the industry’s GHG emissions (98%), methane (CH4) emissions from ships increased over this period (particularly over 2009–2012) due to increased activity associated with the transport of gaseous cargoes by liquefied gas tankers due to methane slip. There is potential for this trend to continue in the future if shipping moves to liquefied natural gas (LNG)-powered ships.

Nations pledged in the 2015 Paris Agreement “to achieve a balance between anthropogenic emissions by sources and removals by sinks of GHG in the second half of this century”. This means getting to “net zero emissions” between 2050 and 2100. 2050 therefore represents a key milestone in the Paris Agreement, which the IMO explicitly references in its initial strategy.

The 2018 and 2023 GHG strategy from the IMO does not alone secure 1.5°C or clearly show that efforts have been pursued to achieve this. But, they increase the possibility of being able to keep global average temperature increases within this limit. Immediate measures to implement the strategy will be required to urgently peak and reduce GHG emissions in line with 1.5°C. The IMO will review their GHG strategy at set intervals overtime, so changes are to be expected in the future. 

The objective of the Poseidon Principles for Marine Insurance is to use the knowledge on portfolio climate alignment to support marine insurance clients on how do adopt and align their business with responsible environmental impacts. They aim to be voluntary, practical to implement, verifiable, fact-based, and effective. Signatories commit to implementing the Principles in their internal policies, procedures and standards.

The Principles are intended to evolve over time following a regular review process to ensure that they are practical and effective, are linked to and support the IMO’s GHG measures developed overtime, and that further environmental factors are identified for inclusion.

The Poseidon Principles for Marine Insurance offer a framework for insurers to assess and disclose the climate alignment of their hull and machinery  (H&M) portfolios. H&M represents the second largest part of marine insurance coverage, with Marine Cargo as the largest portion. This first step offers the greatest coverage and potential for impact across marine insurance. In terms of data availability to measure carbon emissions, H&M offers a comparable starting point to the Poseidon Principles for Financial Institutions as a tangible first step to assess and disclose climate alignment.

By following the framework and common baseline, climate alignment data is available for signatories to better enable the alignment of their portfolios with responsible environmental impacts. Climate alignment is currently the only environmental factor considered by the Poseidon Principles for Marine Insurance. This scope will be reviewed and may be expanded by Signatories on a timeline that is at their discretion.

The Poseidon Principles for Marine Insurance were developed in an effort spearheaded by global shipping insurers, leading industry players (brokers, shipowners and classification societies) as well as the Global Maritime Forum, Swiss Re Corporate Solutions, and UMAS. The drafting group included Gard, Cefor, Willis Towers Watson, Mærsk, Star Bulk, and Lloyd’s Register. The International Union of Marine Insurers (IUMI) was regularly consulted.

The Poseidon Principles for Marine Insurance were developed with the involvement of shipowners. This was to ensure that the Principles were developed and shaped in a way that considered the shipowner perspective as the clients of the signatories and affiliate members. How the Principles will affect clients was prioritised throughout the process, to ensure that shipowners are supported in the best way.

The Global Maritime Forum and UMAS have been part of this work since its inception. They have also been working with other initiatives such as the Poseidon Principles for Financial Institutions and the Sea Cargo Charter, to ensure that various initiatives within the shipping sector are compatible. A broader group of NGOs and other stakeholders have been kept informed throughout the process, like the UNEPFI as well as IUMI.

The Poseidon Principles for Marine Insurance were developed in December 2021 and were strongly inspired by the Poseidon Principles for Financial Institutions. The four core Principles are the same for both initiatives, which also use the same metric, the AER (Annual Efficiency Ratio).

Another similar initiative similar is the Sea Cargo Charter, a framework for responsible chartering. The ambition to develop the Sea Cargo Charter finds its source is the very early stages of the Poseidon Principles. The four core Principles are the same for both, but the two frameworks rely on different metrics. Both Poseidon Principles uses AER and can therefore rely on the IMO DCS to collect data, while the Sea Cargo Charter uses EEOI and thus have a different approach to source data.

Institutions wishing to become a signatory or affiliate member must submit 3 documents to the the Secretariat of the Poseidon Principles for Marine Insurance: the Standard Declaration, the Signatory Application, and the Membership Agreement. Once accepted into the Association, the new member will have five months to complete and submit the Self-Assessment to the Secretariat. All documents are available from the Secretariat.

The Standard Declaration is the formal commitment required of insurance providers to become a signatory, or for other institutions to become an affiliate member. It announces the intent of the institution to follow all requirements of the Principles. The Standard Declaration is available from the Secretariat.

Along with the Standard Declaration and Application, an institution wishing to become a signatory or affiliate member must complete the Membership Agreement. This document outlines legal obligations for signatories. The Membership Agreement is available on the website.

The purpose of the Self-Assessment is to ensure that each member has made appropriate arrangements to fulfill its obligations under the Poseidon Principles for Marine Insurance and identified any challenges to doing so. The Self-Assessment is as brief as possible to reduce the administrative burden, while still addressing the core responsibilities of members. The questions focus on ensuring that members are aware of timelines and obligations, have engaged internal stakeholders, have engaged clients, and have a plan for engaging the necessary service providers to complete their climate alignment assessment. The Self-Assessment is available from the Secretariat.

The Poseidon Principles for Marine Insurance are designed to support other sustainable insurance initiatives. They are aligned with the Poseidon Principles for Financial Institutions and the Sea Cargo Charter, and are also intended to support other initiatives, such as the Carbon Disclosure Project (CDP), the Task Force on Climate-related Financial Disclosure (TCFD), the Science Based Targets Initiative (SBTi), and the UNEPFI Principles for Sustainable Insurance (UNEP PSI).

The Principles support the transition of global shipping, as well as the work of the Partnership for Carbon Accounting Financials (PCAF). As such, the Principles set a pioneering framework for reporting emissions for the shipping industry, thus enhancing accountability and transparency and creating a global baseline to support and work towards the greater climate goals.

The Poseidon Principles for Marine Insurance were developed in recognition of the insurance industry’s role in promoting responsible environmental stewardship throughout the maritime value chain. Signatories are recognised for contributing to an initiative that is ground-breaking in the spheres of shipping and insurance. Furthermore, signatories gain access to like-minded network of organisations and valuable data that can be used to assess and mitigate potential climate risks.

The aim of the Principles is to support clients and benchmark the starting point for how they can reduce the climate impact of their business. With clients of signatories sharing key environmental performance information and data with their insurer, as they already do with their lenders or with their charterers, there is the added benefit of knowing where they stand with their climate alignment.

The Sign-up Fee for 2024 is €12,000 and is paid to the Poseidon Principles Association when becoming a signatory/affiliate member. This one time fee for new joiners and is subject to approval and change by all signatories the Annual Meeting each year.

The Annual Fee for 2024 is €8,500 for signatories and €3,500 for affiliate members. It is paid annually to the Poseidon Principles Association in accordance to the Governance Rules and is also subject to approval and change by all signatories the Annual Meeting each year.

In the first year of membership, the Sign-up Fee and the Annual Fee are required to be paid.

In shipping, carbon intensity represents the total operational emissions generated to complete one unit of transport work, which is measured in grams of CO2 per ton-nautical miles. For the Poseidon Principles for Marine Insurance, this is measured using a carbon intensity measure known as Annual Efficiency Ratio (AER), which is reported in unit grams of CO2 per dwt-nm (gCO2/dwt-nm). The IMO DCS enables the calculation of the AER, thus ensuring that the Poseidon Principles for Marine Insurance are consistent with the IMO’s regulations.

Work is ongoing in 2023 to align the current Poseidon Principles for Marine Insurance trajectories with the 2023 IMO GHG Strategy and its revised ambition, including consideration of the full life cycle of emissions (a “well-to-wake” perspective) and the impact of other GHG species besides carbon dioxide (CO2). Emissions intensity will be used.

In the context of the Poseidon Principles for Marine Insurance, a decarbonisation trajectory is currently a representation of how many grams of CO2 a single ship can emit to move one tonne of goods one nautical mile (gCO2/tnm) over a time horizon to be in line with the IMO’s minimum threshold of 50% absolute emissions reduction. The Poseidon Principles for Marine Insurance provide two trajectories as part of the annual reporting requirements: one with 50% CO2 reduction in absolute carbon emissions by 2050 (the “50% Reduction Trajectory”), and the other with 100% CO2 reduction in absolute carbon emissions by 2050 (the “100% Reduction Trajectory”).

The IMO’s 2018 GHG Strategy refers to GHG emissions for its absolute reduction, but carbon intensity for its relative target. There is no reason for this distinction. The Principles derive their trajectories using an absolute carbon emissions reduction. While this is a proxy for GHG emissions, it is the dominant source of GHG emissions in shipping. In July 2023, the IMO revised its strategy with the ambition to reduce total annual GHG emissions to net-zero around 2050 in a well-to-wake CO2e perceptive. It also takes into account interim checkpoints in 2030 (20% reduction, striving for 30% compared to 2008 levels) and 2040 (70% reduction, striving for 80% compared to 2008 levels). Work is ongoing in 2023 to align the current Poseidon Principles for Marine Insurance trajectories with this revised ambition.

Decarbonisation trajectories are specified by ship type and size because carbon intensities vary as a function of ship type and size, as well as a ship’s technical and operational specification. The trajectory is used to help measure the alignment of vessels, products, and the portfolio of Signatories. The trajectories will be reviewed and improved over time to maintain the robust nature of the initiative and remain in step with up to date climate science and goals.

The Secretariat and official advisors of the Poseidon Principles for Marine Insurance produce and provide standard decarbonisation trajectories for each ship type-class and size for signatories, based on agreed and clearly stated assumptions. The trajectories are based on the most up to date data source of the IMO-recognized information and will be updated once new information becomes available.

They are produced in a format that allows for simple weighting aggregation. This is to ensure that once the carbon intensity of vessels is understood, it is simple and practical to understand climate alignment. This also ensures that numbers are comparable between signatories.

The trajectories are consistent with the IMO Strategy’s minimum threshold of a 50% CO2 reduction of absolute carbon emissions in international shipping by 2050 (the “50% Reduction Trajectory”). This does not alone secure the Paris Agreement’s well below 2°C global mandate and efforts to limit the temperature increase even further to 1.5°C. In order to support the move toward climate neutrality by mid-century, a 100% CO2 reduction trajectory in absolute carbon emissions by 2050 is also provided (the “100% Reduction Trajectory”). To this end, both decarbonisation trajectories will be reported annually.

In September 2022, signatories committed to reporting their climate alignment against a 1.5ºC goal, thus aligning fully with the ambition of the Paris Agreement. In the meantime, the IMO adopted its 2023 GHG Revised Strategy. While the IMO’s revised strategy was more ambitious than expected, there are shortcomings in terms of alignment with the Paris Agreement’s target of limiting global temperature increases to 1.5ºC. Upon analysis of the impact of MEPC 80, the GHG reduction levels used to define the future potential new Poseidon Principles for Marine Insurance trajectories are quite close to the 1.5ºC pathway for shipping. 

Due to the infancy of both the IMO guidance and the Poseidon Principles for Marine Insurance itself, and taking into consideration the similarity between the initiative’s current ambitions (which include a 100% CO2 trajectory) and the revised IMO ambitions, the members decided for 2023 to concentrate on strengthening the current methodology and reflecting on the journey so far. This has postponed both the introduction of revised 2023 IMO GHG Strategy-aligned trajectories or any additional trajectory aligned with a 1.5°C future for this reporting cycle. 

The trajectories will be reviewed and improved over time to maintain the robust nature of the initiative and remain in step with up to date climate science and goals.

The methodology that underpins the Poseidon Principles for Marine Insurance has been carefully designed to ensure that no type or size of vessel is disadvantaged. Thus, it does not matter which types or sizes of vessel are in a hull and machinery portfolio; what matters is the carbon intensity of those vessels relative to their respective decarbonisation trajectories.

There is no publicly available data for this calendar year which would allow climate alignment to be calculated per ship type or size, so there is some uncertainty on whether current portfolios are likely to be aligned with the trajectory. It is expected that the median carbon intensity by ship type and size will not be far from today’s trajectory alignment requirements, in large part because the fleet has seen significant carbon intensity improvement (slow steaming, increase in attention on energy efficiency, new build EEDI regulation) since 2008. Historical data shows some variation within each ship type and size, so depending on the mix of ships in a given insurer’s portfolio this may not be the case. If results from the first year of reporting show that there is a systemic (across signatories’ portfolios) significant misalignment, there is scope to revise the assumptions underpinning the trajectories. Likewise, the trajectories will be updated as more accurate data becomes available (e.g. EU MRV data, new IMO GHG Study, and any analysis presented by the IMO).

The Poseidon Principles for Marine Insurance establish a framework for the assessment of climate alignment and disclosure of hull and machinery portfolios. It does not provide solutions for how to achieve climate alignment. It is the responsibility of signatories to determine how they choose to improve their portfolio performance.

Broadly speaking, however, to improve a portfolio’s score, it is necessary to reduce the carbon intensity of the vessels that underlie the portfolio relative to their respective decarbonisation trajectory. In the short- to medium-term (1-5 years), for most sectors, especially for ships which travel on long haul routes, the most commercially viable solutions for reducing carbon intensity are through speed reduction and energy efficient technologies and operation scheme. Over the long-term (in 10+ years), the sector will need to use increasing quantities of energy and fuel which produce lower GHG emissions when used on board. Options include harvesting of renewable energy on board (wind propulsion, solar, wave), bioenergy, battery energy storage, synthetic or e-fuels (sometimes also called power-to-liquid or power-to-gas), made from renewable electricity or fossil fuel sources in combination with carbon capture and storage (CCS).

These options are at varying levels of readiness and use. For example, solar has been in use for supplementing auxiliary power for some time. Wind assistance technologies have been in use for some time on several sea going ships, as has battery energy storage and biofuel. Some of these options have yet to be deployed for deep sea shipping operation (for example bioenergy and synthetic/e-fuels) but are already deployed and in operation for short sea shipping. Their application for deep sea shipping use is the subject of intense RD&D effort, and their potential availability is expected over the coming decade.

The CO2 conversion factor is set by the IMO.

It is the same as used in other IMO regulatory mechanisms (e.g. EEDI).

The source of the data is from direct operations from the ship using the methodology provided by the IMO DCS. Therefore, the data is not adjusted, rather it is as provided by vessel for mandatory purposes.

Any improvements undertaken by the owner in terms of efficiency (design or operational) will be reflected in the fuel consumption and hence in the data/score.

Different fuels have a different CO2 emissions factor, and this is reflected in the calculation of fuel consumption to CO2 emissions.

Much like other operational efficiency measures, this will result in reduced fuel consumption and hence be reflected in the data/score of the vessel.

Older vessels may have a higher fuel consumption, which in turn would be reflected in the vessel’s AER.

The IMO DCS is mandatory and has gone into effect in January 2019. Shipowners who do not comply within the timeframe set by the IMO will not have a Statement of Compliance which will affect their license to operate. In other words, it is not availability of data but rather access to the data for these purposes that will be of primary concern for signatories. It is the assessment of the law firm WFW that insurance providers are within their rights under existing policy agreements to demand disclosure of data necessary to comply with the Poseidon Principles for Marine Insurance.

Nonetheless, the Poseidon Principles for Marine Insurance do take into account that in some circumstances, collecting the necessary data may not be possible. In this instance, signatories will be required to disclose the percentage of the eligible portfolio for which there is non-disclosure. This information will be available to other signatories but will not be publicly disclosed.

An external audit is not a requirement of the Poseidon Principles for Marine Insurance. However, in practice, some insurance providers will choose to have an independent assessment in line with their other reporting activities.

Signatories to the Poseidon Principles for Marine Insurance are expected to comply with both the Accountability and Transparency requirements. Altogether, these are:

a.  The overall climate alignment of the signatory’s hull and machinery portfolio reported as a +/- percentage figure;

b. The percentage of eligible hull and machinery portfolio that is reporting;

c.  The percentage of portfolio for which preferred and allowed pathway tracks were used;

d. A list of the providers it used.

All information will be shared privately with other signatories. Thus, if a signatory make all calculations on their own, they will have to report that to the Secretariat, which will share this information with other signatories. Only the portfolio alignment score will be made public.

It is the opinion of WFW that typically insurance providers will be well within their rights to ask their clients for this information. However, it is recognised that collecting 100% of relevant data may not be possible in some circumstances.

In this instance, signatories will be required to disclose the percentage of their eligible portfolio for which they have non-disclosure. This information will be available to other signatories. Please see Table 3 in the Technical Guidance of the Poseidon Principles for Marine Insurance for an example of this.

If there are significant inconsistencies, it will fall to the governance system to determine how to address the issue. This is to preserve the integrity and legitimacy of the Principles, as we expect this percentage to improve over time.

Classification societies are members of the International Association of Classification Societies (IACS) and as such can work together to share the data (and have done so in other contexts). 

Insurance providers are within their rights under most current agreements to demand disclosure of data necessary to comply with the initial Poseidon Principles for Marine Insurance. It was at the request of shipowners in the drafting group that the Principles should include a standardised covenant clause covering the more specific information so that they do not have to negotiate similar wording with every provider.

While the covenant wording is strongly recommended, it is not compulsory for signatories. However, if all signatories start using it in new agreements it will de facto be in common usage. There is no suggestion that existing agreements should be amended.

As a signatory of the Poseidon Principles for Marine Insurance, the reporting requirements are:

• The overall climate alignment scores of a signatory’s hull and machinery portfolio reported as a +/- percentage figure.
• The percentage of eligible hull and machinery portfolio that is reporting.
• The percentage  of  portfolio  for  which  preferred  and  allowed  pathway tracks  were  used.
• A list of the names of providers it used.

Only the signatory’s overall climate alignment score will be published. All other information listed above will be shared with other signatories but will not be made public. For further details see the Transparency section of the Technical Guidance.

Every effort has been made to minimise the reporting requirements of the Poseidon Principles for Marine Insurance themselves. While it is required that signatories include their portfolio climate alignment figure in relevant institutional reports (e.g., sustainability reports), the Poseidon Principles for Marine Insurance do not interact with any other reporting initiatives.

The Poseidon Principles for Marine Insurance will publish the portfolio climate alignment scores of signatories in the Annual Disclosure Report each year which will also provide some context in order to put the scores in perspective and correctly interpret them. Signatories are required to publish their portfolio climate alignment in relevant institutional reports (e.g., sustainability report) on timeline that is appropriate for them. There is however nothing to stop individual signatories to publish their climate alignment at a more granular level, for example by vessels category.

Steering Committee: The Steering Committee is comprised of 8 to 12 representatives of signatories to the Poseidon Principles for Marine Insurance. One member acts as Chair, one member as Vice Chair, one member as Treasurer. Steering Committee members hold a senior position in their companies relevant for the Poseidon Principles for Marine Insurance. The Steering Committee leads the Association’s meetings. Members of the Steering Committee are volunteers and are therefore not compensated by the Association. The list of members currently part of the Steering Committee can be found on the website

Signatories/affiliate members: All signatories/affiliate members are members of the Poseidon Principles for Marine Insurance Association and are encouraged to participate in and contribute to the management of the association in a manner that supports the Principles and is appropriate for their institution. Those institutions who have become signatories/affiliate members will appoint a senior representative to join relevant meetings of the association, such as the Annual Meeting. Just as with the Steering Committee, the representative must hold a position relevant to the Poseidon Principles for Marine Insurance. Signatories can nominate a representative from their institution to become a member of the Steering Committee. Nominees are then voted into positions by all signatories and serve a term in the Steering Committee as outlined in the Governance Rules.

Technical Committee: Signatories previously agreed to establish the Technical Committee. Its role is to ensure methodological integrity of the Poseidon Principles for Marine Insurance within the scope agreed by the Steering Committee. The Technical Committee does not have decision-making power; it formulates proposals which are then brought up to signatories. The Technical Committee is composed of a subset of signatories and is supported by the Advisory and Secretariat. Technical Committee members must hold appropriate technical background.

Secretariat: The role of the Secretariat is to maintain the day-to-day business and administration of the Steering Committee, the Principles, and the signatories/affiliate members. The Secretariat serves a facilitating function in the Steering Committee, Technical Committee, and among members. The Secretariat role can be fulfilled by a relevant non-profit and independent third-party entity. This role is currently fulfilled by the Global Maritime Forum.

Advisory: The advisory advises and guides the technical discussions and expertise of the Principles, including creating and revising the scope of the Principles or the decarbonisation trajectory. It ensures the used methodology and data found in the Principles are current, relevant, and simple to implement for signatories. The advisory is also involved in working groups and takes part in the Steering Committee or Technical Committee meetings as needed. Current technical advisory is UMAS.