Large shipping losses have declined by more than a third (38%) over the past decade, according to Allianz’s Safety & Shipping Review 2018, with this downward trend continuing in 2017. Yet recent events such as the collision of the oil tanker Sanchi and the impact of the NotPetya malware underline that the shipping sector is being tested by a number of traditional and emerging risk challenges.
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 US, contributed to the loss of more than 20 vessels, according to the annual review, which analyzes reported shipping losses over 100 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,” said Baptiste Ossena, Allianz’s global product leader of hull and marine liabilities. “However, as the use of new technologies on board vessels grows, we expect to see changes in the maritime loss environment in future. The number of more technical claims will grow – such as cyber incidents or technological defects – in addition to traditional losses, such as collisions or groundings.”
There are multiple new risk exposures for the shipping sector, according to Allianz including cyber attacks and the increasing size of boxships, which pose fire containment and salvage issues. The changing climate brings new route risks, Allianz said, with fast-changing conditions in Arctic and North Atlantic waters posing new hazards. Environmental scrutiny is growing as the industry seeks to cut emissions, bringing new technical risks and the threat of machinery damage incidents at the same time, the German insurance giant pointed out.
Almost a third of shipping losses in 2017 (30) occurred in the South China, Indochina, Indonesia and Philippines maritime region, up 25% annually, driven by activity in Vietnamese waters. This area has been the major global loss hotspot for the past decade, leading some media commentators to label it the new Bermuda Triangle. The major loss factors are actually weather, busy seas and lower safety standards on some 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 also a 29% annual increase in reported shipping incidents in Arctic Circle waters (71), according to Allianz analysis.
“Human error continues to be a major driver of incidents,” said Captain Rahul Khanna, Allianz’s global head of marine risk consulting. “Inadequate shore-side support and commercial pressures have an important role to play in maritime safety and risk exposure. Tight schedules can have a detrimental impact on safety culture and decision-making.”
Better use of data and analytics could help, Khanna maintained. “By analysing data 24/7 we can gain new insights from crew behavior and near-misses that can identify trends. The shipping industry has learned from losses in the past but predictive analysis could be the difference between a safe voyage and a disaster,” he said.