2015 was shipping’s safest year for a decade but cyber threats, extreme weather and budget cuts still pose big risks to vessels, a new report by Allianz Global Corporate & Specialty (AGCS) says.
Some 85 vessels were declared total losses during 2015, a 45% decrease over the past 10 years and three ships less than during 2014, according to ACGS’ fourth annual ‘Safety and Shipping Review 2016’. The report analyses reported shipping losses of over 100 gross tons and can be downloaded for free here.
The report found 2,687 shipping incidents (casualties including total losses) were reported globally during 2015, down 4% on the previous year. Over 25% of all losses (22 ships) occurred in the South China, Indochina, Indonesia and Philippines region during 2015.
Looking to the future, as containerships get bigger and bigger, so too do the monetary risks. The industry may need to prepare for a billion-dollar (or more) total loss scenario, AGCS warned in the report.
Two “mega ships”, the CSCL Indian Ocean and APL Vanda, ran aground last month along, which AGCS said raises questions about the prospect of more serious incidents. “There are concerns commercial pressures in the salvage business have reduced easy access to the salvors required for recovery work on this scale,” the company said.
Bad weather accounted for three of the five largest vessels lost in 2015, including the El Faro, one of the US’ worst commercial maritime disasters seen in decades, the report says.
Extreme weather events are becoming more commonplace, and AGCS expects the effects of a “super” El Niño to create more extreme conditions that will plague the shipping industry this year too.
“The fact that superstorms are causing ships to sink is concerning,” Sven Gerhard, AGCS’ global product leader, hull & marine liabilities, said in a release. “We are seeing more and heavier natural catastrophe events. Weather routing will continue to be a critical component to the safe navigation of vessels.”
Meanwhile, AGCS says cyber risk exposure “is growing beyond data loss” and warns the industry may only have a few years to prepare for the risk of a vessel loss as use of electronic navigation and the “Internet of Things” becomes more commonplace.
“Pirates are already abusing holes in cyber security to target the theft of specific cargoes,” Captain Andrew Kinsey, AGCS’ senior marine risk consultant, said. “The cyber impact cannot be overstated. The simple fact is you can’t hack a sextant.”
Although 2015 was a generally safe year for shipping, piracy attacks failed to decline last year and attacks in south-east Asia rose, especially in Vietnam, the firm said.
Another big threat to vessels is more insidious, and stems from budget cuts and weakening shipping and commodity markets, AGCS said.
“The economic downturn – and its impact on the shipping sector – is likely to have a negative impact on safety,” said Captain Rahul Khanna, global head of marine risk consulting at 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.”
AGCS the past 12 months have seen an increase in the frequency of losses that can likely be attributed to depressed commercial conditions and cost-cutting.