Shipping safety remains at all-time high but risks lie ahead: AGCS

Shipping losses remained at a historic low in 2020, with 49 large ships lost and the number of incidents down 4% year on year to 2,703, but Covid-19, cyber, supply chain and climate challenges lay ahead for the industry, according to Allianz Global Corporate & Specialty’s (AGCS) latest annual review. The report also warns that piracy rose in the Gulf of Guinea last year and the risk could yet be magnified by the pandemic. The insurer’s Safety & Shipping Review 2021 reports that the 49 large ships lost at sea last year is one less than 2020. It is the second-lowest total this century, says AGCS, with more than 870 shipping losses in total during the past decade. The south China, Indochina, Indonesia and Philippines region remains the main loss hotspot. It accounted for a third of all losses at 16 last year, representing a small increase year on year. The east Mediterranean and Black Sea (seven) and Arabian Gulf (four) regions both saw significant increases in loss activity to rank second and third. Cargo vessels (18) accounted for more than a third of all vessels lost in 2020. Foundering was the most frequent cause of loss and most cargo vessels were lost in southeast Asian waters. The number of losses involving cargo and passenger vessels increased year on year. Meanwhile, the number of total shipping incidents declined by 4% from 2,818 to 2,703 in 2020. The British Isles, North Sea, English Channel and Bay of Biscay maritime region saw the highest number of reported incidents (579), although this was slightly down year on year. Machinery damage/failure was the top cause of shipping incidents, accounting for 40%. AGCS says the international shipping industry continued its long-term positive safety trend during the past year but has to face up to challenges ahead. “The shipping sector has shown great resilience through the coronavirus pandemic, as evidenced by strong trade volumes and the recovery we are seeing in several parts of the industry today,” says Captain Rahul Khanna, global head of marine risk consulting at AGCS. “Total losses are at historic low levels for the third year running. However, it is not all smooth sailing. The ongoing crew crisis, the increasing number of issues posed by larger vessels, growing concerns around supply chain delays and disruptions, as well as complying with environmental targets, bring significant risk management challenges for shipowners and their crews,” he adds. One such problem is piracy. According to AGCS figures, the world’s piracy hotpot, the Gulf of Guinea, saw 130 crew kidnapped last year in 22 incidents, the highest number ever. AGCS says this problem has continued, with vessels being targeted further away from shore. It warns that the Covid-19 pandemic could exacerbate piracy because it is tied to underlying social, political and economic problems, which could deteriorate further. Former hotspots like Somalia could re-emerge as targets for pirates as a result, adds the insurer. The AGCS report explains that Covid-19 has had less effect than feared on maritime trade. Global seaborne trade volumes are on course to surpass 2019 levels this year after declining slightly in 2020. However, the recovery remains volatile. Covid-19-related delays at ports and shipping capacity management problems have led to congestion at peak times and a shortage of empty containers. It was estimated that there were a record 300 freighters waiting to enter overcrowded ports in June. The time container ships are spending waiting for port berths has more than doubled since 2019. AGCS says there is an ongoing “humanitarian crisis” for crew affected by Covid-19 restrictions. There were an estimated 200,000 seafarers onboard vessels in March unable to be repatriated due to Covid-19 restrictions, its report says. And this can impact safety levels. “Extended periods at sea can lead to mental fatigue and poor decision-making, which ultimately impact safety. There have already been shipping incidents which have featured crews who have been onboard for longer than they should have. Seafarer training is suffering, while attracting new talent is problematic given working conditions. Future crew shortages could impact the surge in demand for shipping as international trade rebounds,” warns AGCS. The company adds that although the pandemic has caused limited direct marine insurance claims, carriers haven’t been completely spared. “Overall, the frequency of marine claims has not reduced. We are also seeing an increased cost of hull and machinery claims due to delays in the manufacture and delivery of spare parts, as well as a squeeze on available shipyard space,” says Justus Heinrich, global product leader of marine hull at AGCS. The shipping review also says that the Suez Canal blockage by the Ever Given containership highlights how ever-increasing vessel sizes continue to pose a “disproportionately large risk”, with costly groundings and salvage operations. “Larger vessels present unique risks. Responding to incidents is more complex and expensive. Approach channels to existing ports may have been dredged deeper and berths and wharfs extended to accommodate large vessels but the overall size of ports has remained the same. As a result, a ‘miss’ can turn into a ‘hit’ more often for the ultra-large container vessels,” says Captain Nitin Chopra, senior marine risk consultant at AGCS. The Ever Given incident also sent shockwaves through global supply chains dependent on seaborne transport. It compounded delays and disruption already caused by trade disputes, extreme weather, the pandemic and surges in demand for containerised goods and commodities, notes AGCS. “Such events expose the weak links in supply chains and have magnified them,” says Captain Andrew Kinsey, senior marine risk consultant at AGCS. “Developing more robust and diversified supply chains will become increasingly important, as will understanding pinch points and supply chain nodes.” With momentum gathering behind international efforts to tackle climate change, the shipping industry is likely to come under increasing pressure to accelerate its efforts. “A huge investment in research and development is required if the industry is to meet the challenging targets being set. Today’s existing fleet and technology will not get the shipping industry to the International Maritime Organization’s target of a 50% cut in emissions by 2050, let alone the more ambitious targets being discussed by national governments,” says Captain Khanna. And finally, the report turns its attention to cyber risk. It notes that all four of the world’s largest shipping companies have already been hit by cyberattacks. With geopolitical conflict increasingly played out in cyberspace, concerns are growing about a potential strike on critical maritime infrastructure, such as a major port or shipping route, it warns.

Shipping safety remains at all-time high but risks lie ahead: AGCS

Piracy in Gulf of Guinea rises

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