Large shipping losses are at their lowest level this century, according to Allianz, but the insurer has warned the market is still facing significant challenges.
Allianz’s Safety & Shipping Review 2019 has stated a decline in major losses by more than 50% year on year. However, while the number of major losses on vessels over 100 gt has steadily fallen, concerns around the impact of the sulphur cap on fuels in 2020 and continued numbers of fires on vessels have tempered the positives.
“Today’s record low total loss activity is certainly influenced by fortunate circumstances in 2018, but it also underlines the culmination of the long-term improvement of safety in the global shipping industry,” said Baptiste Ossena, global product leader Hull & Marine Liabilities, AGCS. “Improved ship design, technology, tighter regulation, and more robust safety management systems on vessels have also helped to prevent breakdowns and accidents from turning into major losses. However, the lack of an overall fall in shipping incidents, heightened political risks to vessel security, complying with 2020 emissions rules, and the growing number of fires on board bring challenges.”
The number of overall reported shipping incidents showed only marginal improvement, declining by less than 1% to 2,698 in 2018. Machinery damage was the major cause of incidents, accounting for more than a third of the 26,000 plus incidents over the past decade – twice as many as the next highest cause, collision.
The South China, Indochina, Indonesia, and the Philippines maritime region remain the top loss locations. One in four losses occurred in the region last year at 12, although this has significantly reduced from 29 in 2017. The East Mediterranean and Black Sea (6) and the British Isles (4) rank second and third, respectively.
“Despite signs of improvement, Asia will remain a hot spot for marine claims due to its high level of trade, busy shipping routes, and older fleets,” said the insurer. “However, newer infrastructure, better port operations, and more up-to-date navigation tools will help to address challenges.”
Fires continue to generate large losses on board with a rise in the number of reported incidents to 174. The trend has continued through 2019 with a number of recent problems on container ships and three significant events on car carriers. Misdeclared cargo, including incorrect labelling/packaging of dangerous goods is believed to be behind a number of fires at sea.
“Onboard firefighting capability can be limited,” said Allianz. “If considerable outside assistance is required, significant damage can occur to the ship before this happens, greatly increasing the size of any salvage claim.”