Panama Canal expansion will increase risk for all warns AGCS

The Panama Canal is set to expand its capacity via the 'Third Set of Locks Project', which will see two new sets of locks constructed and create a third transit lane for larger ships. In a new report entitled Panama Canal 100: Shipping Safety And Future Risk that coincided with the canal's 100th anniversary last week, Allianz Global Corporate & Specialty (AGCS) predicts that the value of insured goods transiting the canal zone may increase by over US$1bn per day following the introduction of the new locks. AGCS forecasts the expansion will enable between 12 and 14 larger vessels per day, approximately 4,750 per year, to pass through the canal.hideMany of these are expected to be New Panamax class container vessels of 12,600 teu, which are far larger than the existing largest 4,400 teu vessels currently able to access the canal. AGCS experts warn that the increased traffic and larger vessels may challenge the Panama Canal's improved safety record with the risks heightened during the new locks’ initial opening period. According to Captain Rahul Khanna, AGCS' Global Head of Marine Risk Consulting: "Larger ships automatically pose greater risks. The sheer amount of cargo carried means a serious casualty has the potential to lead to a sizeable loss and greater disruption. For example, a fully-loaded New Panamax 12,600 teu container ship is as long as four football fields with a beam of up to 49 metres and could have an insured cargo value alone of US$250 million." Such vessels can pose serious salvage challenges in a congested shipping environment, potentially leading to blockages, warned AGCS. If an accident occurs there may also be an insufficient number of qualified and experienced salvage experts available to handle the New Panamax ships, it added. But the insurer explained that the potential impact of any shipping incident is much wider than just impeding progress through the Panama Canal. With more larger ships on the move in the surrounding region, an incident could also affect traffic at major ports in the US and elsewhere, resulting in a potential increase in business interruption and insurance losses. In addition, a number of US ports and terminals on the East and Gulf Coasts are exposed to hurricanes. Larger ships carrying higher concentrations of insured goods will spend more time in these ports, posing an increased risk. For example, a large portion of Superstorm Sandy losses in 2012 was due to storm surge that flooded ports in the northeast region of the US. To cater for the larger ships, changes are needed at global ports along the canal's supply chain, said AGCS. Additional infrastructure upgrades will be needed in the form of larger gantry cranes to work these larger ships and handle the increase in volume. Processing capability will also need to be improved to avoid bottlenecks at choke points in ports. AGCS believes training is key to mitigating the new risks in the canal region itself and affected ports. "The expansion of the Panama Canal will represent a new shipping environment for many mariners. Due to the increase in the number of larger vessels passing through this important waterway the level of training provided to pilots will be extremely important. Attempting to manoeuvre one of these vessels through such a restricted space in itself creates a much bigger hazard," explained Captain Khanna. The Panama Canal Authority has, however, invested heavily in training, including plans to charter a post-Panamax ship to practice manoeuvres through the new shipping lane. However, training cannot fully prepare mariners, said Captain Khanna. "It is extremely important that the processes and systems in place are dynamic and that the industry learns from mistakes as it goes along, because inevitably a few will be made. Although much training will be done, this can only be done on a few vessels. But when the canal is opened for real, a whole host of different vessels with different characteristics will be passing through. That will be challenging," he explained.

Panama Canal expansion will increase risk for all warns AGCS

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