The 2023 Nordic Plan: A focus on sustainability


The Plan’s most recent version, which will formally enter into force on 1 January 2023, has a new focus on sustainability. In particular, clause 12-12 which deals with repairs to the ship now provides an incentive for shipowners to choose repair yards that require a shorter voyage and therefore produce lower CO2 emissions.

Under the Nordic Plan, if an insured ship is damaged and there has been no total loss then the insurer will be liable for the costs of repairs. Before the repairs take place the insurer can demand that tenders be obtained from various different repair yards. The assured will then choose their preferred yard.

The assured has an opportunity to reject any given tender as long as they have a ‘justifiable reason’ for doing so. What is and isn’t a justifiable reason will be decided on a case by case basis, but it is interesting to note that in the commentary to the Nordic Plan, Environmental, Social and Governance (‘ESG’) factors are listed as relevant issues for consideration. For example, the assured will have the right to demand that repairs are carried out at a yard which complies with ESG standards which they reasonably and usually require.

In the event that the assured chooses one of the repair yards that is not the cheapest of those tendered, the insurer’s liability will be limited to the amount which would have been paid out if the cheapest yard had been chosen. In addition to this cap, the insurer will be liable for a further sum based on the time saved by using the chosen yard.

A new addition to the Nordic Plan is the introduction of another mechanism by which the insurer’s maximum liability can be increased, this time based on the amount of carbon dioxide emissions which are avoided by choosing a particular repair yard. The extra allowance is stipulated at USD 40 per ton of CO2 emissions saved compared to the alternative emissions for the cheapest tender.

These additions provide novel incentives for shipowners to consider ESG factors. It will be interesting to see whether other insurance contracts follow suit.
Source: Standard Club



Leave A Reply

Your email address will not be published.