News Risk Management25 Jul 2018

Asia:Region sees rise in shipping losses, even as global downward trend continues

25 Jul 2018

A third of shipping losses occurred in the South China, Indochina, Indonesia and Philippines maritime region, up 25% annually, even as large shipping losses declined by more than a third (38%) over the past decade including 2017, according to Allianz Global Corporate & Specialty SE's (AGCS) Safety & Shipping Review 2018.

Incidents in Vietnamese waters drove losses in what some media commentators call the “new Bermuda Triangle”, given that it has been the number one area worldwide for major shipping incidents for the past decade. Last year, about 32% (30) of losses occurred here. The main factors are bad weather – in 2017 Typhoon Damrey contributed to six losses, busy seas, and safety standards which lag behind global averages.

In contrast, there were 94 total losses reported globally 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 AGCS’ annual review, which analyses reported shipping losses over 100 gross tons (GT).

Cargo vessels (53) accounted for over half of all vessels lost globally in 2017. Fishing and passenger vessel losses are down year-on-year. Bulk carriers accounted for five of the 10 largest reported total losses by GT. The most common cause of global losses remains foundering (sinking), with 61 sinkings in 2017. Wrecked/stranded ranks second (13), followed by machinery damage/failure (8).

“The (global) 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 AGCS Hull & Marine Liabilities global product leader Baptiste Ossena.

“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.”

Dangerous seas and territorial disputes

Political tensions around major Asian shipping routes are leading to disruption and a potential heightened risk of collision. Already a key route for east-west trade from China, South Korea and Japan and accounting for one-third of global shipping trade, the South China Sea is also the cause of territorial disputes between several countries. These disputes have resulted in increasing military presence in the South China Sea, with the US and China conducting naval exercises.  

"The territorial claims and disputes may have larger implications long term and threaten the freedom of the seas in South East Asia, with implications for trade with Asia. A growing concentration of trade and political tensions increases volatility in the region creating safety issues," said AGCS senior marine risk consultant Andrew Kinsley.

New risk exposures in shipping

AGCS’ report noted the multiple new risk exposures for the shipping sector: Ever-larger container ships pose fire containment and salvage issues, while changing climate brings new route risks, with fast-changing conditions in Arctic and North Atlantic waters posing new hazards. Environmental scrutiny is also growing as the industry seeks to cut emissions, bringing new technical risks and the threat of machinery damage incidents at the same time. Shippers continue to grapple with balancing the benefits and risks of increasing automation on board.

The NotPetya cyber-attack caused cargo delays and congestion at nearly 80 ports, underlining the threat of cyber risks for the sector. Such cyber incidents have been a wake-up call for the shipping sector, where many operators previously thought themselves isolated from this threat, noted AGCS’ report.

“As technology on board increases, so do the potential risks,” said AGCS Marine Risk consulting global head Captain Rahul Khanna. “The current lack of incident reporting masks the true picture when it comes to cyber risk in the marine industry,” said Mr Khanna. “The NIS directive will bring more transparency around the scale of the problem.”

Other risks

Other risk topics identified in the review include:

  • Larger container ships create new exposures, especially fire: Container-carrying capacity has increased by almost 1,500% in 50 years. Today’s ‘mega-ships’ create new risk exposures and there have been a number of fires at sea in recent years. Fire-fighting capabilities have not necessarily kept pace with increasing vessel sizes.
  • Climate change brings new route risks: Climate change is impacting ice hazards for shipping, freeing up new trade routes in some areas, while increasing the risk of ice in others – over 1,000 icebergs drifted into North Atlantic shipping lanes last year, creating potential collision hazards. Cargo volumes on the Northern Sea Route reached a record high in 2017.
  • Emissions rules bring problems: Estimates suggest that the shipping sector’s emissions levels are as high as Germany’s, prompting a recent pledge to reduce all emissions by 50% in the long-term, alongside existing commitments to reduce sulphur oxide emissions by 2020. As the industry looks to technical solutions to achieve these aims, there could be accompanying risk issues with engines and bunkering of biofuels, as well as operator training.
  • Autonomous shipping and drones: Legal, safety and cyber security issues are likely to limit widespread growth of crewless ships for now. Human error risk will still be present in decision-making algorithms and onshore monitoring bases. Drones and submersibles have the potential to make a significant contribution to shipping safety and risk management. Future use could include pollution assessment, cargo tank inspections, monitoring pirates and assessment of the condition of a ship’s hull in a grounding incident.

AGCS’ full report can be found here.

| Print | Share

CAPTCHA image
Enter the code shown above in the box below.

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.

 

Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.

Other News



Follow Asia Insurance Review