JULY 18, 2018 — Large shipping losses have declined 38% over the past decade, with this downward trend continuing in 2017, according to Allianz Global Corporate & Specialty’s (AGCS) Safety & Shipping Review 2018.
Leading some commentators to label it “the New Bermuda Triangle,” the South China, Indochina, Indonesia and Philippines maritime region accounted for nearly one third of shipping losses in 2017 (30), up 25% annually, driven by activity in Vietnamese waters. This area has been the major global loss hotspot for the past decade, with the major loss factors actually being weather, busy seas and lower safety standards on some regional domestic routes.
Outside of Asia, the East Mediterranean and Black Sea region is the second major loss hotspot (17) followed by the British Isles (8).There was a 29% annual increase in reported shipping incidents in Arctic Circle waters (71), according to AGCS analysis.
Worldwide, there were 94 total losses reported around the shipping world in 2017, down 4% year-on-year (98) – the second lowest in 10 years after 2014. Bad weather, such as typhoons in Asia and hurricanes in the U.S., contributed to the loss of more than 20 vessels, according to the annual review, which analyzes reported shipping losses over 100 gross tons (GT).
“The decline in frequency and severity of total losses over the past year continues the positive trend of the past decade. Insurance claims have been relatively benign, reflecting improved ship design and the positive effects of risk management policy and safety regulation over time,” says Baptiste Ossena, Global Leader Hull & Marine, AGCS. “However, as the use of new technologies on board vessels grows, we expect to see changes in the maritime loss environment in the future.”
New risk exposures for the shipping sector include:
- Ever-larger container ships pose fire containment and salvage issues.
- Changing climate conditions bring new route risks, particularly in the Arctic and North Atlantic waters.
- Environmental scrutiny is growing as the industry seeks to cut emissions, which brings new technical risks coupled with the threat of machinery damage.
- Shippers continue to grapple with balancing the benefits and risks of increasing automation on board.
- The NotPetya cyber-attack caused cargo delays and congestion at nearly 80 ports, further underscoring the growth of cyber risk.
It is estimated that 75% to 96% of shipping accidents involve human error, says the report. Human error is also behind 75% of 15,000 marine liability insurance industry claims analyzed by AGCS – costing $1.6 billion.
“Crews are under increasing pressure as shipping supply chains are streamlined for greater efficiency. While vessels once spent weeks in port, turn-around times for a cargo ship are now measured in days; such tight schedules can have a detrimental effect on safety culture and decision-making,” said Andrew Kinsey, Sr. Marine Risk Consultant, AGCS. “There is always the need to strike the right balance between safety and commercial pressures. We need to look at behavior modification and how to get personnel to move away from normalizing risk.”
Moving forward, better use of data and analytics could help as the shipping industry produces a significant amount of data, but could utilize it better to produce real-time findings and alerts.
Cyber incidents like the global NotPetya malware event have served as a wake-up call for the shipping sector. Many operators previously thought themselves isolated from this threat. At the same time, new European Union laws such as the Network and Information Security Directive (NIS), which requires large ports and maritime transport services to report any cyber incidents and brings financial penalties, will exacerbate the fall-out from any future failure – malicious or accidental.
Other key risk topics discussed in the report include:
Autonomous shipping and drones: Legal, safety and cyber security issues are likely to limit widespread growth of crewless ships, for now. Human error risk will still be present in decision-making algorithms and onshore monitoring bases. Drones and submersibles, however, have the potential to make a significant contribution to shipping safety and risk management. Future use could include pollution assessment, cargo tank inspections, monitoring pirates and assessment of the condition of a ship’s hull in a grounding incident.
Climate change: Climate change is impacting ice hazards for shipping, freeing up new trade routes in some areas, while increasing the risk of ice in others – over 1,000 icebergs drifted into North Atlantic shipping lanes last year, creating potential collision hazards. Cargo volumes on the Northern Sea Route reached a record high in 2017.
Emission Levels: Estimates suggest that the shipping sector’s emissions levels are as high as Germany’s, prompting a recent pledge to reduce all emissions by 50% in the long-term, alongside existing commitments to reduce sulfur oxide emissions by 2020. As the industry looks to technical solutions to achieve these aims, there could be accompanying risk issues
Download the report HERE