Insurance broker Marsh has warned owners they may face significant penalties unless they tackle the impending new rules for low sulphur emissions.
Its report, Emissions Regulations: Concerns for the Marine Industry, warns shipowners that if any of their vessels are deemed unseaworthy by failing to comply with the more stringent sulphur emissions (SOx) regulations set to be introduced on 1 January 2020, their insurance cover could be affected.
The chairman of its global marine practice has warned that the broker fears there will be a stampede to access yards in the run up to the implementation date and those who leave it too late will find themselves unable to use their vessels until such work is carried out.
The International Maritime Organisation (IMO) is to implement new regulations to reduce the sulphur footprint of commercial shipping vessels. Under Annex VI of the IMO’s International Convention for the Prevention of Pollution from Ships (MARPOL), the global cap on sulphur emissions will be reduced from the current 3.5% to 0.5% on 1 January 2020.
However, the report warned, “It is not possible to achieve these low levels of sulphur emissions using traditional HSFO that has not been treated before the exhaust gases are released. At the time of the announcement of the regulatory changes, many in the industry doubted the 2020 timeline for SOx reductions would be adhered to, but, with no indication that this will be the case, ship operators are now faced with some stark choices if they are to remain compliant with Annex VI of the MARPOL convention.”
Marsh’s report added that shipowners should not assume that insurance cover will continue to remain in place following a breach of the MARPOL Convention Annex VI after 1 January 2020. The failure to comply with international conventions, and consequently losing flag state convention certification, could affect the validity of a shipowner’s insurance cover if they continue to operate without prior insurer consent.
Owners hoping that there will be a relaxation in the 2020 deadline, similar to the implementation date for the Ballast Water Convention (BWC), may well be disappointed.
“Confusion over the level of ballast water purification required and the cost and acceptability of equipment required to achieve compliance with the BWC made it necessary to relax the implementation of this convention, amending it to be brought in over a phased period between now and 2024,” said the report. “However, shipowners are advised not to assume the same might happen with Annex VI of MARPOL. Coming to this conclusion about when the reduction in the sulphur cap will come into effect, this may be misguided, following the recent statements by IMO reinforcing their commitment to the introduction of the sulphur cap in 2020.
“The IMO has recently made it clear that it is determined to see this amendment take force on 1 January 2020. Dr. Edmund Hughes, technical officer of the Marine Environment Division for the IMO, said recently at the European Refining Technology conference in Athens that the global reduction from the current 3.5% sulphur limit would ‘enter into force on January 1, 2020 without any delay’,” the report added.
Marcus Baker, chairman, Marsh’s Global Marine Practice, commented, “As 1 January 2020 approaches, Marsh envisages large numbers of vessels seeking to book space in repair yards for the installation of new equipment or conversion to LNG in an effort to comply with the MARPOL requirements. Latecomers may find that convenient or preferred yards have no room and, being unable to comply with the new sulphur cap rules by 2020, may risk their vessels becoming non-compliant, which could have ramifications for their insurance provision. Shipowners should act early to ensure any modifications that are required can be carried out in good time.”