What the delay to the IMO’s Net-Zero Framework means for marine insurers

This article originally appeared in Insurance Day, November 2025. 

In a surprise change of course, the International Maritime Organisation (IMO) has pushed back the vote on the proposed Net-Zero Framework by a year.

In April, a majority of IMO member countries agreed to the plan, so it was expected that the Net-Zero Framework would be made legally binding at the October meeting of the Marine Environment Protection Committee. Instead, negotiations broke down between member states, and a motion was passed to adjourn discussions on the Net-Zero Framework for 12 months. Insurers may be wondering what effect this could have on the maritime industry.

The purpose of the IMO’s Net-Zero Framework is to support the organisation in achieving its target of net zero by 2050. The framework proposes to amend Annex VI of the International Convention for the Prevention of Pollution from Ships (MARPOL). MARPOL currently has 158 contracting states representing 98.5% of the world’s tonnage. Of this number, 100 states separately ratify each Annex and Annex VI on air pollution.

The framework has two elements: a fuel standard and a pricing mechanism. The fuel standard, essentially, requires ships to gradually reduce how much greenhouse gas is emitted for each unit of energy used, across a fuel’s life cycle. Separately, the framework includes a pricing mechanism for emissions from ships. Ships which emit above the gradually increasing greenhouse gas (GHG) fuel intensity targets will be required to buy offsets.

The IMO Net-Zero Fund will be set up to collect any monetary contributions from over-emitting ships and revenue made from the fund will be put towards initiatives including rewarding low-emission ships, supporting research and innovation, and mitigating the impacts of climate change on vulnerable states.

Compliance levels

There are two levels of compliance for GHG fuel intensity targets: the base target, which is a lower standard, and a direct compliance target (DCT), a higher standard. Ships are required to calculate their fuel intensity target each year by considering how much GHG is emitted for each unit of energy used. The “well-to-wake” approach is adopted to calculate this, where the entire lifecycle of the fuel is accounted for, from production to use. If a ship’s fuel intensity target exceeds the required the level of compliance, penalties will apply. Compliant ships can earn surplus units which can be traded or banked, while non-compliant ships will be expected to mitigate their excess emissions.

The new framework applies to all ships of 5,000 gross tonnage and above, who call at a port in a MARPOL Annex VI country. It specifically excludes certain categories of ship, such as military vessels, domestic-only ships, and ships not propelled by mechanical means. Under the framework, shipowners and operators will be the ones obliged to reduce their vessel’s emissions.

Enforcement of the framework would be mainly carried out by the port state control of any MARPOL Annex VI country. When a ship enters port, national maritime authorities are free to conduct inspections to ensure compliance with international conventions and regulations and impose penalties, including arrest of the ship, if they find the ship to be in breach of international conventions.

The framework was approved by a majority of IMO member states in April of this year; however, it still needs to be formally adopted. Adoption requires a two-thirds majority of Parties to MARPOL and this vote has now been pushed back by a year to October 2026.

If it is adopted, an “acceptance period” will begin for around 10 months, in which IMO member states will have the opportunity to accept or object to the new framework. If there are no successful objections, then the framework will be entered into force six months after the acceptance period closes. However, these timelines can be modified by the parties to the MARPOL Convention during the adoption process.

Pushing the vote back will greatly increase uncertainty in the market and will likely lead to delays in decarbonising the shipping industry. Significant investment is needed for the shipping industry to transition to low- and no-carbon fuels. Without a clear indication that these fuels will be in demand, investors will not want to commit to funding the research, development, and major infrastructure changes needed to make their use a reality. 

New fuels transition risks

Currently, there are no low- or no-carbon fuels available for commercial ships. While LNG is already being used as a shipping fuel, it still produces significant GHG emissions and would not be sufficient, on its own, to meet the IMO’s targets. Ammonia and methanol are both being explored as alternative shipping fuels, but they are not available for commercial use.

A transition to either of these fuels would require widespread change to the industry: ship design would need to change, port facilities would need to be reconfigured to bunker ammonia/methanol, and crew would need to be trained in new safety protocol for these fuels.

Insurers should consider how adopting new fuels would change their risk exposure and how they can begin to price the risk of new fuels. Insurers may also need to review policy wordings to consider compliance requirements for seaworthiness and permitted ports, if only some ports have infrastructure to support low-carbon fuels, while others don’t.

The next year will bring further uncertainty to the shipping industry. If the IMO Net-Zero Framework is adopted, significant changes will need to be made by the entire maritime industry, but if the framework is rejected, it leaves a question mark hanging over the widespread adoption of low-carbon fuels. Regardless, insurers will need to be aware of how to support their insured clients in navigating rapidly changing regulatory landscapes and transition to new fuels.