Allianz: Shipping Losses Down in 2015

Shipping losses continued their long-term downward trend with 85 total losses reported worldwide in 2015, according to Allianz Global Corporate & Specialty SE’s (AGCS) fourth annual Safety and Shipping Review 2016.

Although the number of losses remained stable year-on-year, declining by just 3% compared with the previous year (88), 2015 was the safest year in shipping for a decade, the report says. Losses have declined by 45% since 2006, driven by safety environment and self-regulation.

More than a quarter of all losses occurred in the South China, Indochina, Indonesia and Philippines region (22 ships). Losses increased year-on-year, unlike other major regions.

Cargo and fishing vessels accounted for over 60% of ships lost globally, with cargo losses up for the first time in three years. The most common cause of total losses is foundering (sinking), accounting for almost 75% of losses, up 25%, and often driven by bad weather, the report finds.

There were 2,687 reported shipping incidents (casualties including total losses) globally during 2015, down 4%. The East Mediterranean and Black Sea remains the top incident hotspot. Three vessels share the accolade of being the most incident-prone – a ro-ro in the Great Lakes region, a hydrofoil in the East Mediterranean & Black Sea and a ferry in the British Isles – with 19 incidents over the past decade.

“The economic downturn – and its impact on the shipping sector – is likely to have a negative impact on safety,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting, AGCS.

“Many sectors, such as general cargo, bulk and offshore, are already challenged and any drop in safety standards will be a serious case for concern.”

It is critical that economic pressures do not allow a “put it off until later” safety mentality to develop, AGCS experts warn. Some shipowners are already stretching maintenance to longest possible intervals while others are laying-up vessels.

“Reactivation of these vessels to a market that has moved on technologically may result in a painful exercise. There is a need for standardized lay-up procedures,” says Captain Jarek Klimczak, Senior Marine Risk Consultant, AGCS.

Cost pressures can impair crewing conditions, passenger ship safety and salvage and rescue as well. AGCS has seen an increase in fatigue-related insurance claims over the past decade. With crew numbers already often at their lowest possible level, and a future staffing shortage anticipated, longer shift patterns could exacerbate this issue. Meanwhile, training remains below par in some areas, such as electronic navigation, which should not be seen as panacea but as a complementary tool.

“Mega ship” salvage issues and superstorm ship sinkings

Groundings of mega container ships, as was the case with the CSCL Indian Ocean and APL Vanda in February 2016, raise questions about a more serious incident. There are concerns commercial pressures in the salvage business have reduced easy access to the salvors required for recovery work on this scale, the report says. The industry may need to prepare for a $1bn+ total loss scenario.

The report also notes that exceptional weather events are becoming more commonplace, as bad weather was a factor in three of the five largest vessels lost last year, including the El Faro, one of the worst US commercial maritime disasters in decades.

Cyber risk evolves

As shipping industry’s reliance on interconnected technology increases there has been a number of notable cyber incidents and technological advances including the “Internet of Things” (IoT) and electronic navigation.

“Pirates are already abusing holes in cyber security to target the theft of specific cargoes,” says Captain Andrew Kinsey, Senior Marine Risk Consultant, AGCS. “The cyber impact cannot be overstated. The simple fact is you can’t hack a sextant.”

Arctic casualties increase

There were 71 reported shipping incidents in Arctic Circle waters during 2015, up 29% year-on-year and the highest in a decade. In 2006 there were just 8 incidents. Machinery damage/failure (46) was the cause of 65% of incidents, driven by the harsh environment. The mandatory Polar Code, expected to enter into force in 2017, will help ensure more responsible shipping in such high-risk waters but safety questions remain.