Large shipping losses have declined by 50% over the past decade, largely driven by the development of a more robust safety environment by shipowners, according to Allianz Global Corporate & Specialty SE’s (AGCS) fifth annual Safety & Shipping Review 2017.
85 large vessels were lost worldwide in 2016, down by 16% when compared with a year earlier.
The number of shipping incidents also declined slightly year-on-year, by 4% with 2,611 reported, according to the review, which analyzes reported shipping losses over 100 gross tons.
“While the long-term downward loss trend is encouraging, there can be no room for complacency. The shipping sector is being buffeted by a number of interconnected risks at a time of inherent economic challenges,” Baptiste Ossena, ACGS’ Global Product Leader Hull & Marine Liabilities, commented.
Environmental scrutiny is increasing with record fines for vessel pollution. New ballast water management rules that come into force in 2017 are welcomed, but the cost of complying could have a significant impact on already-stressed shippers, Allianz said.
Political risk is increasing, with activity in hotspots such as Yemen and the South China Sea having the potential to affect vessel routes.
“A ‘perfect storm’ of increasing regulatory pressure combined with narrowing margins and new risks is gathering,” Ossena further said.
‘Perfect storm’ of regulation, cost-savings and cyber security looms, says Allianz
More than a quarter of shipping losses in 2016 occurred in the South China, Indochina, Indonesia and Philippines region – the hotspot for the last decade.
Loss activity remained stable but was still almost double in the East Mediterranean and Black Sea region, which was the next highest.
Loss activity was up in the Japan, Korea and North China; East African Coast; South Atlantic and East Coast South America; and Canadian Arctic and Alaska maritime regions.
With 30 vessels, cargo ship segment accounted for more than a third of all vessels lost.
In addition, passenger ferry losses increased slightly, driven by activity in the Mediterranean and South East Asia.
Standards remain an issue in some parts of Asia with bad weather, poor maintenance, weak enforcement of regulations and overcrowding contributing to loss activity, it was indicated in the review.
As disclosed, the most common cause of global shipping losses remains sinking, accounting for over half of all losses in 2016, with bad weather often a factor.
Meanwhile, over a third of shipping casualties during 2016 were caused by machinery damage.
Piracy incidents around the globe and shipping incidents in Arctic Circle waters declined year-on-year.
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.
As informed, crew negligence, inadequate vessel maintenance and cyber attacks are increasing areas of concern, as economic pressures challenge budget.
New navigational and monitoring technologies could help reduce both the impact of human error and machinery breakdown, the global insurer advised.
However, the issue of over-reliance on technology is ongoing and incidents continue to result, particularly around navigation, Allianz concluded in the review.