Johannesburg--Large shipping losses have declined by 50% over the past decade, largely driven by development of a more robust safety environment by ship-owners, according to Allianz Global Corporate & Specialty SE’s (AGCS) fifth annual Safety & Shipping Review 2017.
were 85 vessels reported as total losses around the shipping world in
2016, down 16% compared with a year earlier (101). Last year set
safety records in the sector with the lowest number of losses in the
past 10 years, preliminary figures show. The number of shipping
incidents (casualties) also declined slightly year-on-year, by 4%
with 2,611 reported, according to the review, which analyzes reported
shipping losses over 100 gross tons.
“While the long-term
downward loss trend is encouraging, there can be no room for
complacency,” says Baptiste Ossena, Global Product Leader Hull &
Marine Liabilities, AGCS. “The shipping sector is being buffeted by
a number of interconnected risks at a time of inherent economic
Environmental scrutiny is increasing with
record fines for vessel pollution. New ballast water management
rules that come into force in 2017 are welcomed, but the cost of
complying could have a significant impact on already-stressed
shippers. Political risk is increasing, with activity in hotspots
such as Yemen and the South China Sea having the potential to affect
vessel routes. The threat of offshore cyber-attacks is also
significant. “A ‘perfect storm’ of increasing regulatory
pressure combined with narrowing margins and new risks is gathering,”
More than a quarter of shipping losses in
2016 (23) occurred in the South China, Indochina,
Indonesia and Philippines region – the top hotspot for the last
decade. Loss activity remained stable but was still almost double the
East Mediterranean and Black Sea region (12), which was
the next highest. Loss activity was up in the Japan, Korea and North
China; East African Coast; South Atlantic and East Coast South
America; and Canadian Arctic and Alaska maritime regions.
vessels (30) accounted for more than a third of all
vessels lost. Passenger ferry losses increased slightly (8),
driven by activity in the Mediterranean and South East Asia.
Standards remain an issue in some parts of Asia with bad
weather, poor maintenance, weak enforcement of regulations and
overcrowding contributing to loss activity.
The most common
cause of global shipping losses remains foundering (sinking),
accounting for over half of all losses in 2016, with bad weather
often a factor. Meanwhile, over a third of shipping casualties during
2016 were caused by machinery damage. This was also responsible for
driving a 16% uptick in incidents in the East Mediterranean &
Black Sea region (563), enough to see it replace the
British Isles as the top incident location over the past decade.
Piracy incidents around the globe and shipping incidents in Arctic
Circle waters declined year-on-year.
In 2016, piracy continued its downward
trend as it recorded only 191 incidents, down 22 from 2015 (246),
which is the lowest total recorded since 1998. The reduction reflects
the successful measures taken to contain the threat of Somali pirates
in the Gulf of Aden and Indian Ocean, including the introduction of
armed guards on-board vessels and the presence of a multinational
naval task force. As a result there were just two recorded incidents
off the coast of Somalia in 2016, compared with 160 in 2011. Despite
this positive trend, the threat of Somali pirates has not gone away.
In March 2017 pirates captured the oil tanker, Aris 13 off the coast
of Somalia and demanded a ransom – the first such seizure of a
large commercial vessel since 2012. Following this incident there has
been four further attempts or successful incidents, raising concerns
about piracy resurfacing more widely in the region. However, other
risk challenges remain, such as the rise in crew kidnappings in parts
of Asia and West Africa and the impact of an expected increase in
After Hanjin – economic pressures
continue to bite
The collapse of one of the world’s
largest shipping companies, Hanjin Shipping over the past year
exposed the perilous state of some parts of the sector. Bankruptcies
are rising and when debt levels are high and earnings are low,
ship-owners often seek to make cost savings on maintenance budgets,
training and crewing levels, all of which can spike loss
“Crew negligence and inadequate vessel
maintenance are two potential areas of increasing risk, particularly
if ship-owners opt to recruit crew with less experience and training,
or choose to stretch maintenance work to the longest possible
intervals in order to save money,” says Duncan Southcott, Global
Head of Marine Claims at AGCS. According to AGCS, negligence/poor
maintenance is already one of the top causes of liability loss in the
shipping sector and an increase in maintenance-related claims is
observed. Implementing rigorous inspection and maintenance regimes is
Technology drives safety improvements but
over-reliance presents risk challenges
technology is already impacting shipping – from electronic
navigational tools through to shore-based monitoring of machinery and
even crew welfare. Technology has the potential to significantly
reduce both the impact of human error – which AGCS analysis
shows accounted for approximately 75% of the value of almost 15,000
marine liability insurance claims over five years; equivalent to over
$1.6bn – and machinery breakdown.
For example, telematics
are already successfully deployed in the automotive sector, improving
driver behavior. The shipping sector could also benefit. Insurers
such as AGCS are in the early stages of working with ship-owners to
utilize Voyage Data Recorder (VDR) analysis to improve safety.
data is already used in accident investigation, but there are also
important lessons to be learned from analyzing everyday operations,
as well as crew behavior and decision-making in near-misses,” says
Captain Rahul Khanna, Head of Marine Risk Consulting at AGCS.
However, the issue of over-reliance on technology is
ongoing and incidents continue to result, particularly around
navigation. “Crews and officers must understand the shortcomings
and limitations of technology,” says Khanna. “Sometimes replacing
common sense decisions with digital inferences is not such a good
Technology can also be used to improve crew
welfare. For example, offshore health problems can often be difficult
to address due to location. In response, AGCS, together with Allianz
Worldwide Care and Allianz Global Assistance, is now offering crew
24/7 access to medical advice through a dedicated app and on-board
equipment. “Such innovative ‘telemedicine’ assistance services
can help vessels to make more informed decisions about a crew
member’s health, potentially reducing the need to make costly route
deviations,” says Ossena.
The threat of cyber-attacks
continues to be significant. Most attacks to date have been aimed at
breaching corporate security rather than taking control of a vessel.
“The shipping sector doesn’t have a particularly heightened risk
awareness when it comes to cyber. As no major incident due to a
cyber-attack has taken place yet, many in the industry are still
complacent about the risks,” says Khanna. As many as 80% of
offshore security breaches are estimated to be down to human error.
“IT security should not be put on the backburner. If hackers were
able to take control of a large container ship on a strategically
important route they could block transits for a long period of time,
causing significant economic damage.”
Other risk topics
identified in the review include:
Structural integrity of vessels: This remains an issue
in the wake of a number of incidents and losses resulting from
breaches in recent years, particularly concerning vessels that have
Fires at sea: The recent number of
fires on container ships has raised questions about whether safety
systems have kept pace with vessel size. Inaccurately labelled cargo
can exacerbate the issue.
The potential for a $4bn loss: Larger
vessels, the rising cost of wreck removal, environmental
sensitivities and greater liability and regulation means such a
scenario may no longer be unlikely.
Autonomous shipping could be
operating on fixed regional routes in the near future. Safety
considerations will be crucial to development with concerns about
collisions and challenges around regulatory and liability issues.