Allianz: Global Shipping Losses Spiraling Down

Global shipping losses continued their downward trend with 75 reported in 2014, making it the safest year in shipping for 10 years, Allianz Global Corporate & Specialty SE’s (AGCS) third annual Safety and Shipping Review 2015 shows.

The review analyzes reported shipping losses of over 100 gross tons.

Losses declined by 32% compared with the previous year and were well below the 10-year loss average of 127.

More than a third of 2014’s total losses were in two maritime regions. South China, Indo China, Indonesia and the Philippines (17 ships) and Japan, Korea and North China (12 ships). Cargo and fishing vessels accounted for over 50% of all losses.

The most common cause of total losses is foundering (sinking/submerging), accounting for 65% of losses in 2014. With 13 ships wrecked or stranded, grounding was the second most common cause with fires/explosions third, but significantly down year-on-year.

According to the report, there were 2,773 shipping incidents (casualties) globally (including total losses) during 2014. The East Mediterranean & Black Sea region was the top hotspot (490), up 5% year-on-year. The British Isles, North Sea, English Channel and Bay of Biscay ranked second (465), up 29%, and was also the top incident hotspot over the past decade.

December was the worst month for losses in the Northern Hemisphere and August in the Southern Hemisphere. For every total loss in the Southern Hemisphere there are 7 in the Northern Hemisphere.

One vessel in the Great Lakes region of North America lays claim to the title of unluckiest ship. Analysis shows it has reportedly been involved in 19 incidents in the past 8 years – including six in one year. It has suffered a fire, engine failure, steering failure and even hit a submerged log.

Passenger ship safety and crew levels in the spotlight

Recent casualties such as Sewol and Norman Atlantic have once again raised significant concerns over training and emergency preparedness on passenger ships three years after the Costa Concordia disaster. Seven passenger ships were lost during 2014, accounting for almost 10% of total losses.

“In many cases construction of the vessel is not the only weak point. These two incidents underline a worrying gap in crew training when it comes to emergency operations on ro-ro ferries or passenger ships,” said Sven Gerhard, Global Product Leader Hull & Marine Liabilities, AGCS.

The general shipping trend for smaller crews means seafarers are being asked to do more with less. Minimum manning levels reduce the ability to train people onboard, which can provide invaluable insight and should not become the normal day-to-day level for safe operations, according to AGCS.

How big is teu big?

Container ship safety is also under the spotlight with ever-increasing ship sizes, as evidenced by the January 2015 inauguration of the world’s largest container ship, the MSC Oscar (19,224 teu). Yet ships as large as 22,000 teu are expected to be in service soon.

“Larger ships can also mean larger losses. The industry should prepare for a loss exceeding $1 billion in future featuring a container vessel or even a specialized floating offshore facility,” Gerhard said.

Maximum exposure would not necessarily be limited to vessel and cargo value but could also include environmental or business interruption backlash. This raises concerns about whether risk management needs reviewing after an 80%+ container ship capacity increase in a decade.

AGCS sees a number of risks for such mega-ships including the fact operation is limited to a small number of deep water ports, meaning an increased concentration of risk. There is also a world-wide shortage of qualified seaman. Salvage and removal is also challenging.

“The shipping industry should think long and hard before making the leap to the next ship size,” added Captain Rahul Khanna, Global Head of Marine Risk Consulting, AGCS.

Full report available here