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Home Carriers 3PL

Allianz: Shipping Losses Fall But Situation Remains Muddy

by Dafizeck Daud
May 11, 2022
in 3PL, Carriers, Courier and express, Editor's Choice, Maritime transport, News, Ports
Hyundai Glovis Shift Towards Gas Shipping Market

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The international shipping industry is responsible for the carriage of around 90 percent of world trade, so vessel safety is critical. The sector continued its long-term positive safety trend over the past year but Russia’s invasion of Ukraine, the growing number of costly issues involving larger vessels, crew and port congestion challenges resulting from the shipping boom, and managing challenging decarbonization targets, means there is no room for complacency, according to marine insurer Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2022.

“The shipping sector has demonstrated tremendous resilience through stormy seas in recent years, as evidenced by the boom we see in several parts of the industry today,” says Captain Rahul Khanna, global head of Marine Risk Consulting at AGCS.

“Total losses are at record lows – around 50 to 75 a year over the last four years compared with 200+ annually in the 1990s. However, the tragic situation in Ukraine has caused widespread disruption in the Black Sea and elsewhere, exacerbating ongoing supply chain, port congestion, and crew crisis issues caused by the Covid-19 pandemic.

“At the same time, some of the industry’s responses to the shipping boom, such as changing the use of, or extending the working life of, vessels also raise warning flags. Meanwhile, the increasing number of problems posed by large vessels, such as fires, groundings and complex salvage operations, continue to challenge ship owners and their crews.”

The annual AGCS study analyzes reported shipping losses and casualties (incidents) over 100 gross tons. In 2021, 54 total losses of vessels were reported globally, compared with 65 a year earlier. This represents a 57 percent decline over 10 years (127 in 2012), while during the early 1990s the global fleet was losing 200+ vessels a year. The 2021 loss total is made more impressive by the fact that there are an estimated 130,000 ships in the global fleet today, compared with some 80,000 30 years ago. Such progress reflects the increased focus on safety measures over time through training and safety programs, improved ship design, technology and regulation.

According to the report, there have been almost 900 total losses over the past decade (892). South China, Indochina, Indonesia, and the Philippines maritime region is the main global loss hotspot, accounting for one-in-five losses in 2021 (12) and one-in-four-losses over the past decade (225), driven by factors including high levels of trade, congested ports, older fleets, and extreme weather. Globally, cargo ships (27) account for half of the vessels lost in the past year and 40 percent over the past decade. Foundered (sunk/submerged) was the main cause of total losses over the past year, accounting for 60 percent (32).

While total losses declined over the past year, the number of reported shipping casualties or incidents rose. The British Isles saw the highest number (668 out of 3,000). Machinery damage accounted for over one-in-three incidents globally (1,311), followed by collisions (222) and fires (178), with the number of fires increasing by almost 10 percent.

One of the top five causes of reported ship incidents globally is maritime piracy and armed robbery attacks. Of which, the cases have reached the lowest recorded level since 1994 last year (132), according to the International Maritime Bureau.

The drop can be attributed to successful intervention by authorities but continued coordination and vigilance to is necessary to ensure the long-term protection of seafarers given recent rising numbers of incidents in the Singapore Straits and Southeast Asia and recent reports of incidents in Ivory Coast, Angola and Ghana waters.

Ukraine impact: safety and insurance

The shipping industry has been affected on multiple fronts by Russia’s invasion of Ukraine, with the loss of life and vessels in the Black Sea, disruption to trade, and the growing burden of sanctions. It also faces challenges to day-to-day operations, with knock-on effects for the crew, the cost and availability of bunker fuel, and the potential for growing cyber risk.

The invasion has further ramifications for a global maritime industry already facing shortages. Russian seafarers account for just over 10% of the world’s 1.89 million workforces, while around 4% come from Ukraine.

These seafarers may struggle to return home or rejoin ships at the end of contracts. Meanwhile, a prolonged conflict is likely to have deeper consequences, potentially reshaping global trade in energy and other commodities. An expanded ban on Russian oil could contribute to pushing up the cost of bunker fuel and impacting availability, potentially pushing ship owners to use alternative fuels. If such fuels are of substandard quality, this may result in machinery breakdown claims in the future.

At the same time, security agencies continue to warn of a heightened prospect of cyber risks for the shipping sector such as GPS jamming, Automatic Identification System (AIS) spoofing and electronic interference which had already been reported in China and the Middle East, prior to the Ukraine invasion.

“The insurance industry is likely to see a number of claims under specialist war policies from vessels damaged or lost to sea mines, rocket attacks and bombings in conflict zones,” explains Justus Heinrich, global product leader, Marine Hull, at AGCS. “Insurers may also receive claims under marine war policies from vessels and cargo blocked or trapped in Ukrainian ports and coastal waters.”

The evolving range of sanctions against Russian interests presents a sizeable challenge. Violating sanctions can result in severe enforcement action, yet compliance can be a considerable burden. It can be difficult to establish the ultimate owner of a vessel, cargo or counterparty. Sanctions also apply to various parts of the transport supply chain, including banking and insurance, as well as maritime support services, which makes compliance even more complex.

Tags: AllianzCargoContainersPortShipping

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