COVID-19 costs could lead to rise in machinery damage incidents, warns Allianz

A crew member carrying out engine maintenance. Credit: Videotel

The global COVID-19 pandemic will exacerbate cost pressures faced by shipowners and this could have a negative impact on safety incidents, marine insurance company Allianz has warned.

The annual Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review study revealed that the number of ship incidents are increasing 5% year on year, driven by machinery damage, which is said to have caused over one in three incidents [safety incidents such as collisions, groundings that may take a vessel out of service but does not result in a total loss] in 2019.

Captain Rahul Khanna, global head of marine risk consulting at AGCS, said, “We know from past downturns that crew and maintenance budgets are among the first areas that can be cut and this can impact the safe operations of vessels and machinery, potentially causing damage or breakdown, which in turn can lead to groundings or collisions. It is crucial that safety and maintenance standards are not impacted by any downturn.”

The inaugural State of Maritime Safety report, released in April 2020 by IHS Markit, noted that low investments made in the repair and upkeep of machinery and hull damage – the top cause of ship accidents – following the 2008 and 2016 economic downturns allowed preventable incidents to turn into major incidents. It also noted the risks that COVID-19 could pose, stating “safety must not be ignored in the rush to re-establish business relations and seek profit”.

Despite looming risks over machinery damage, the AGCS report also conveyed positive news in that the number of ships lost worldwide is decreasing year on year. A total of 41 vessel losses were reported in 2019, representing a near 20% reduction compared with 2018, when 53 vessel losses were reported worldwide.

This tallies with the SAS 2020 State of Maritime Safety report, which showed a similar, steady decline in total losses between 2015 and 2019. It found that total losses largely occurred after vessels foundered [ships that sank as a result of heavy weather, springing of leaks, or breaking in two], or were wrecked or stranded. This tallies with the IHS Markit data in the State of Maritime Safety report, finding that bad weather was in fact accountable for one in five losses.

As well as the disruption of essential maintenance during COVID-19, potentially heightening the risk of machinery damage, the annual study also highlighted 10 challenges that could heighten safety risks. This list included limitations in crew changeover and their impact on sailor welfare, which could lead to an increase in human error on board vessels. The reduced or delayed statutory surveys and port inspections were also highlighted since they could lead to unsafe practices or defective equipment being undetected. AGCS also said it anticipates that the ability to respond quickly to an emergency could also be compromised, with consequences for major incidents which are dependent on external support.

Issues with car carriers and roll-on-roll-off (ro-ro) vessels are flagged in the study as continuing to harbour the biggest safety issues. Total losses involving ro-ros have increased year on year, with smaller incidents up by 20% – a trend that is continuing through 2020, AGCS said. There were almost 200 reported fires on vessels over the past year, which represents a 13% increase, with five total losses caused by fire in 2019 alone, the study confirmed.

AGCS also reported that, although 950 shipping losses have been reported since the start of 2010, the number of vessel losses has decreased by almost 70% in the past decade. The reduction in losses can be attributed to sustained efforts in the areas of regulation, training, and technological advancements, among others, the company said.

The annual AGCS Safety & Shipping Review presents an analysis of reported shipping losses measuring more than 100 gross tons (GT).