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Aug 2018

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Shipowners risk losing cover if they fail to comply with new fuel rules, warns Marsh

Source: AIR | Feb 2018

The International Maritime Organisation (IMO) plans to reduce the global cap on sulphur emissions from 3.5% to 0.5% by 2020. And shipowners risk losing their insurance covers if they do not modify their vessels in time to meet the stringent requirements.
By Ridwan Abbas
 
 
Shipowners face a race against time to execute strategies to reduce sulphur emissions by 1 January 2020, or risk vessels being declared unseaworthy and possibly non-insurable, said broking giant Marsh in a recent report.
 
The IMO, which governs international shipping, had announced in late 2016 that under Annex VI of the IMO’s International Convention for the Prevention of Pollution from Ships (MARPOL), shipowners will have to cut sulphur limits in marine fuel from 3.5% to 0.5% by 2020.
 
The new rule is hard to comply with using current traditional high sulphur fuel oils (HSFO), which means shipowners would have to either switch to higher quality fuels or retrofit current vessels with emission cleaning systems – both of which will incur high costs.
 
Alternatively, shipowners may choose to adopt a ‘wait-and-see’ stance, and some may feel justified doing so having seen the attempted mandatory imposition of the Ballast Water Convention (BWC) in September last year postponed to 2024.
 
The implementation of the BWC had to be relaxed, and amended to be phased in between now and 2024, due to confusion over the level of ballast water purification required and the cost and acceptability of equipment needed to achieve compliance.
 
However, Marsh has advised shipowners not to assume the same would happen with sulphur emission rules,
 
Race against time
But with many shipping companies leaving it late to book space in repair yards for their ships to be adapted to meet regulatory requirements, Marsh’s Chairman of Global Marine Practice, Marcus Baker, warned: “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.” A 
 
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