Large shipping losses went down by 50% over the past decade and 16% year-on-year to 85 in 2016, a report by Allianz Global Corporate & Specialty SE (AGCS) has showed.
In its fifth annual Safety & Shipping Review 2017, the insurance firm attributed the drop primarily to the development of a more robust safety environment by ship-owners.
Analyse shipping losses:
According to the study, which analyses reported shipping losses over 100 gross tonnes, the number of shipping incidents also fell slightly, by 4% year-on-year to 2,611 casualties reported in 2016.
Baptiste Ossena, global product leader of Hull & Marine Liabilities at AGCS, said: “While the long-term downward loss trend is encouraging, there can be no room for complacency.”
Increase in interconnected risk:
“The shipping sector is being buffeted by a number of interconnected risks at a time of inherent economic challenges.”
More than a quarter of shipping losses last year occurred in the South China, Indochina, Indonesia and Philippines region, where despite remaining stable loss activity was the highest recorded last year at 23.
The second highest was recorded in the East Mediterranean and Black Sea region, where a total of 12 losses were reported.
Loss activity rose in the Japan, Korea and North China region, the East African Coast, the South Atlantic and East Coast South America region, and the Canadian Arctic and Alaska maritime region.
Cyber attack threat:
However, according to AGCS, despite large shipping losses going down overall, political risk is increasing with “activity in hotspots such as Yemen and the South China Sea having the potential to affect vessel routes”, and the “threat of offshore cyber-attacks is also significant”.
“A ‘perfect storm’ of increasing regulatory pressure combined with narrowing margins and new risks is gathering,” Ossena added.
Cargo ships accounted for 30 of the vessels lost, while passenger ferry losses increased slightly to 8. “Standards remain an issue in some parts of Asia with bad weather, poor maintenance, weak enforcement of regulations and overcrowding contributing to loss activity,” a company statement noted.
The most common cause of 2016 shipping losses remained foundering, accounting for more than half of them, with bad weather often playing a role.
Over a third of shipping casualties in 2016 was instead caused by machinery damage, while piracy incidents across the world and shipping incidents in Arctic Circle waters dropped year-on-year.
Additionally, according to the report, while the new ballast water management rules coming into force in 2017 are welcomed, the cost of complying could impact significantly on “already-stressed shippers”.
Rise in bankruptcy:
With bankruptcies rising, high debt levels and low earnings, the review added, ship-owners “often seek to make cost savings on maintenance budgets, training and crewing levels, all of which can spike loss activity”.
Duncan Southcott, global head of Marine Claims at AGCS, said: “Crew negligence and inadequate vessel maintenance are two potential areas of increasing risk, 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.”
A statement by AGCS also noted that “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,” adding that the implementation of rigorous inspection and maintenance regimes is “crucial”.
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Source: Allianz Global Corporate & Specialty