Large shipping losses are at a record low having fallen by over 20 percent year-on-year, according to marine insurer Allianz Global Corporate & Specialty SE’s (AGCS)Safety & Shipping Review 2020. However, the coronavirus crisis could endanger the long-term safety improvements in the shipping industry for 2020 and beyond, as difficult operating conditions and a sharp economic downturn present a unique set of challenges.
According to the report released weekend, “Coronavirus has struck at a difficult time for the maritime industry as it seeks to reduce its emissions, navigates issues such as climate change, political risks and piracy, and deals with ongoing problems such as fires on vessels,” says Baptiste Ossena, global product leader, Hull Insurance, AGCS. “Now the sector also faces the task of operating in a very different world, with the uncertain public health and economic implications of the pandemic.”
The annual AGCS study analyzes reported shipping losses over 100 gross tons (GT) and also identifies 10 challenges of the coronavirus crisis for the shipping industry which could impact safety and risk management.
In2019, 41 total losses of vessels were reported around the world, down from 5312 months earlier. This represents an approximate 70 percent decline over 10 years and is a result of sustained efforts in the areas of regulation, training and technological advancement, among others. More than 950 shipping losses have been reported since the start of 2010.
Meanwhile, piracy remains a major risk for shipping. In 2019, there were 162 incidents of piracy and armed robbery against ships worldwide, down from 201 in 2018. This is despite the recent success in tackling Somali pirates. Somalia reported zero piracy incidents in 2019, a trend that continued through the beginning of 2020. However, Somali pirates continue to possess the capacity to carry out attacks in the Somali basin and wider Indian Ocean.
The Gulf of Guinea has re-emerged as the global piracy hotspot accounting for 90 percent of global kidnappings reported at sea in 2019 with the number of crew taken increasing by more than 50 percent to 121 according to the International Chamber of Commerce’s International Maritime Bureau (IMB) . Given heightened political and economic uncertainty in the world today, piracy is a threat that is likely to remain for the foreseeable future.
“Piracy remains an ongoing issue. We thought we had a handle on it but it has manifested yet again,” says Rahul Khanna, global head of Marine Risk Consulting at AGCS. “Hijackings by Somalian pirates may have reduced for now, but incidents have been increasing in West Africa and parts of Asia, where we see a worrying pattern of violent attacks against crew, as well as kidnappings.”
Following an active 2019, there has been no let-up in piracy in 2020. There were 47 attacks reported to the IMB in the first three months of the year, up from 38 in the same period last year, mostly targeting tankers, as well as container ships and bulk carriers. Again, the Gulf of Guinea accounted for the highest number of attacks (21) although there were also (five) vessels boarded in the Singapore Strait and several incidents of armed robbery in Latin America.
The shipping industry has continued to operate through the pandemic, despite disruption at ports and to crew changes. While any reduction in sailings due to coronavirus restrictions could see loss activity fall in the interim, the report highlights 10 challenges that could heighten risks.
“Ship-owners also face additional cost pressures from a downturn in the economy and trade,” says Khanna. “We know from past downturns that crew and maintenance budgets are among the first areas that can be cut and this can impact the safe operations of vessels and machinery, potentially causing damage or breakdown, which in turn can lead to groundings or collisions. It is crucial that safety and maintenance standards are not impacted by any downturn.”
Top loss locations and most affected ships: the West African Coast is third hotspot for losses. The East African Cost is ranked fourth.
According to the report, the South China, Indochina, Indonesia and Philippines maritime region remains thetoploss location with 12 vessels in 2019 and 228 vessels over the past decade – one in four of all losses. High levels of trade, busy shipping lanes, older fleets, typhoon exposure, and safety issues on some domestic ferry routes are contributing factors. However, in 2019, losses declined for the second successive year. The Gulf of Mexico (4) and the West African Coast (3) rank second and third. The East African Coast was tied in the fourth spot.
Cargo ships (15) accounted for more than a third of vessels lost in the past year, while foundered (sunk/submerged) was the main cause of all total losses, accounting for three in four (31). Bad weather accounted for one in five losses. Issues with car carriers and roll-on/roll-off (ro-ro) vessels remain among the biggest safety issues. Total losses involving ro-ros are up year-on-year, as well as smaller incidents (up by 20%) – a trend continuing through 2020.
“The rise in number and severity of claims on ro-ro vessels is concerning. Ro-ros can be more exposed to fire and stability issues than other vessels,” says Khanna. “Many have quick turnarounds in port and a number of accident investigations have revealed that pre-sail away stability checks were either not carried out as required, or were based on inaccurate cargo information. Too many times commercial considerations have endangered vessels and crews and it is vital that this is addressed on shore and on board.”
