Safety Analysis of Global Shipping Industry Shows Cargo Vessels are Biggest Loss Risk

WORLDWIDE – According to Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2018, large shipping losses have declined by more than a third over the past decade, with this downward trend continuing in 2017. Yet recent events such as the collision of the oil tanker Sanchi and the impact of the NotPetya malware on harbour and related logistics underline that the shipping sector is being tested by a number of both traditional and emerging risk challenges, with cargo vessels globally representing the class of vessel usually lost.

There were 94 total losses reported around the shipping world in 2017, down 4% year-on-year from 2016, the second lowest total in 10 years after 2014. Bad weather, such as typhoons in Asia and hurricanes in the US contributed to the loss of more than 20 vessels, according to the annual review, which analyses reported shipping losses over 100 gross tonnes (GT). Baptiste Ossena, Global Product Leader Hull & Marine Liabilities, AGCS, commented:

“The decline in frequency and severity of total losses over the past year continues the positive trend of the past decade. Insurance claims have been relatively benign, reflecting improved ship design and the positive effects of risk management policy and safety regulation over time. However, as the use of new technologies on board vessels grows, we expect to see changes in the maritime loss environment in future. The number of more technical claims will grow, such as cyber incidents or technological defects, in addition to traditional losses, such as collisions or groundings.”

There are multiple new risk exposures for the shipping sector. Ever larger container ships pose fire containment and salvage issues whilst the changing climate brings new risks on established routes, with fast-changing conditions in Arctic and North Atlantic waters posing new hazards. Environmental scrutiny is growing as the industry seeks to cut emissions, bringing new technical risks and the threat of machinery damage incidents at the same time. Shippers continue to grapple with balancing the benefits and risks of increasing automation on board. The NotPetya cyber-attack caused cargo delays and congestion at nearly 80 ports, underlining the threat of cyber risks for the sector.

After writing here earlier today how piracy risks in the region are down, almost a third of shipping losses in 2017 occurred in the South China, Indochina, Indonesia and Philippines maritime region, up 25% annually, driven by activity in Vietnamese waters. This area has been the major global loss hotspot for the past decade. The principal loss factors are weather, exemplified with Typhoon Damrey which caused six losses in November 2017.

Other factors include busier seas and lower safety standards on some domestic routes. Outside of Asia, the East Mediterranean and Black Sea region is the second major loss hotspot with 17 incidents, followed by the British Isles which accrued 8 losses. There was also a 29% annual increase in reported shipping incidents in Arctic Circle waters, up to 71, according to the AGCS analysis.

Cargo vessels accounted for over half of all vessels lost globally in 2017, with a figure of 53 losses. Fishing and passenger vessel losses are down year-on-year while bulk carriers accounted for five of the 10 largest reported total losses by GT. The most common cause of global losses remains foundering, with 61 sinking’s in 2017. Wrecks/stranding ranks second with 13, followed by machinery damage/failure at 8.

Drilling down into the statistics, analysis shows Friday is the most dangerous day at sea with 175 losses of 1,129 total losses reported have occurred on this day over the past decade. Friday 13th really can be unlucky as three ships were lost on this day in 2012 including Costa Concordia, the largest-ever marine insurance loss. The unluckiest ship of the past year (or possibly worst maintained) is a passenger ferry operating in the East Mediterranean and Black Sea region. It was involved in seven accidents in 12 months, all caused by machinery/damage failure.

Despite decades of safety improvements, the shipping industry has no room for complacency. Fatal accidents such as the Sanchi oil tanker collision in January 2018 and the loss of the El Faro in Hurricane Joaquin in late 2015 persist, and human behaviour is often a factor. It is estimated that 75% to 96% of shipping accidents involve human error, the USS Fitzgerald and the USS John S McCain incidents being classic examples. Human factors are also behind 75% of 15,000 marine liability insurance industry claims analysed by AGCS, costing $1.6 billion. Captain Rahul Khanna, Global Head of Marine Risk Consulting, AGCS, said:

“Human error continues to be a major driver of incidents. Inadequate shore-side support and commercial pressures have an important role to play in maritime safety and risk exposure. Tight schedules can have a detrimental impact on safety culture and decision-making.”

The AGCS man takes the view that better use of data and analytics could help. The company says the shipping industry produces a lot of data but could utilise it better, producing real-time findings and alerts, Khanna continued:

“By analysing data 24/7 we can gain new insights from crew behaviour and near-misses that can identify trends. The shipping industry has learned from losses in the past but predictive analysis could be the difference between a safe voyage and a disaster.”

Looking at cyber incidents like the global NotPetya malware event, Allianz says that the incident should have been a wake-up call for the shipping sector. Many operators previously thought themselves isolated from this type of threat. At the same time, new European Union laws such as the Network and Information Security Directive (NIS), which requires large ports and maritime transport services to report any cyber incidents and brings financial penalties, will exacerbate the fall-out from any future failure, malicious or accidental. Khanna explained:

“The current lack of incident reporting masks the true picture when it comes to cyber risk in the marine industry. The NIS directive will bring more transparency around the scale of the problem.”

Other risk topics identified in the review include:

Container ship fires – Container carrying capacity has increased by almost 1,500% in 50 years. Today’s mega-ships create new risk exposures and there have been a number of fires at sea in recent years. Fire-fighting capabilities have not necessarily kept pace with increasing vessel sizes.

Climate change – Climate change is impacting ice hazards for shipping, freeing up new trade routes in some areas, while increasing the risk of ice in others. Over 1,000 icebergs drifted into North Atlantic shipping lanes last year, creating potential collision hazards. Cargo volumes on the Northern Sea Route reached a record high in 2017.

Emissions rules – Estimates suggest that the shipping sector’s emissions levels are as high as those of Germany, prompting a recent pledge from the industry to reduce all emissions by 50% in the long-term, alongside existing commitments to reduce sulphur oxide emissions by 2020. As shipping looks to technical solutions to achieve these aims, there could be unanticipated accompanying risk issues with engines and bunkering of biofuels, as well as operator training.

Autonomous shipping and drones – Legal, safety and cyber security issues are likely to limit widespread growth of crewless ships for now. Human error risk will still be present in decision-making algorithms and onshore monitoring bases. Drones and submersibles have the potential to make a significant contribution to shipping safety and risk management. Future use could include pollution assessment, cargo tank inspections, monitoring pirates and assessment of the condition of a ship’s hull in a grounding incident.

Photo: The death of the containership Rena which foundered off the New Zealand coast in October 2012.