Vessel losses declined 16 percent last year compared with 2015 and the number of shipping incident casualties also dropped on a year-over-year basis, according to a new report from insurance provider Allianz Global Corporate & Specialty.
There were 85 total vessel losses reported throughout the maritime shipping world in 2016, a 16 percent decline from the 101 reported in 2015, according to a new report from insurance provider Allianz Global Corporate & Specialty.
According to the company’s fifth annual safety and shipping review, the industry set records for safety last year, with the lowest number of losses in the past 10 years. The number of shipping incident casualties also declined 4 percent year-over-year to 2,611 reported, according to the review, which analyzes reported shipping losses over 100 gross tons.
The most common cause of global shipping losses was sinking, accounting for over half of all losses in 2016, with bad weather often a factor.
Cargo vessels accounted for more than a third of all vessels lost (30), while passenger ferry losses increased slightly to eight, driven by activity in the Mediterranean and Southeast Asia.
Large shipping losses have declined by 50 percent over the past decade, according to Allianz, with the decline being largely attributed to the development of a more robust safety environment by ship owners.
“Standards remain an issue in some parts of Asia with bad weather, poor maintenance, weak enforcement of regulations and overcrowding contributing to loss activity,” the report said.
Over a third of shipping casualties during 2016 were caused by machinery damage. This was also responsible for driving a 16 percent uptick in incidents in the East Mediterranean & Black Sea region (563), enough to see it replace the British Isles as the top incident location over the past decade.
Piracy incidents around the globe and shipping incidents in Arctic Circle waters declined on a year-over-year basis. However, risk challenges remain, such as the rise in crew kidnappings in parts of Asia and West Africa and the impact of an expected increase in Polar transits, the report said.
More than a quarter of shipping losses last year (23) occurred in the South China, Indochina, Indonesia and Philippines region, which has been the top hotspot for the last decade, the report states. Loss activity remained stable, but was still almost double the East Mediterranean and Black Sea region, which was the next highest area for losses with 12.
Loss activity was up in four regions, according to the report: Japan, Korea and North China; East African Coast; South Atlantic and East Coast South America; and Canadian Arctic and Alaska.
The collapse of Hanjin Shipping, the South Korean ocean carrier that declared bankruptcy in August 2016, exposed the perilous state of some parts of the sector, Allianz Global said in a statement regarding the data, adding that bankruptcies are rising and that when debt levels are high and earnings are low, shipowners often seek to make cost savings on maintenance budgets, training and crewing levels, all of which can spike loss activity.
Crew negligence and inadequate vessel maintenance are two potential areas of increasing risk, according to Duncan Southcott, Allianz Global’s Head of Marine Claims, “particularly if ship-owners opt to recruit crew with less experience and training, or choose to stretch maintenance work to the longest possible intervals in order to save money.”
Negligence/poor maintenance is already one of the top causes of liability loss in the shipping sector and an increase in maintenance-related claims is observed, according to Allianz.
The report also noted the threat of cyber attacks in shipping is significant, even though most attacks to date have been aimed at breaching corporate security rather than taking control of a vessel.
Since no major incident due to a cyber attack has taken place yet, many in the industry are still complacent about the risks, according to Allianz Global Head of Marine Risk Consulting Capt. Rahul Khanna.
“IT security should not be put on the backburner,” Khanna said. “If hackers were able to take control of a large container ship on a strategically important route they could block transits for a long period of time, causing significant economic damage.”
Other risk topics identified in the review include structural integrity of vessels, which remains an issue in the wake of a number of incidents and losses resulting from breaches in recent years, particularly concerning vessels that have been converted; and fires at sea. The recent number of fires on containerships has raised questions about whether safety systems have kept pace with vessel size, according to Allianz.