June 4, 2019

Allianz: Number of large ships lost in 2018 was lowest in a century

Allianz: Number of large ships lost in 2018 was lowest in a century

Just 46 ships sank or burned, but the number of smaller incidents is on the rise, insurance report finds.

By DC Velocity Staff

The number of large ships lost in the past year is at its lowest level this century, following a year-on-year decline of over 50 percent, but the number of small- damage incidents remains high, according to an industry study released today.

Analysis of reported shipping losses over 100 gross tons showed that 2018 included 46 total losses of vessels around the shipping world, down from 98 losses 12 months earlier, according to "Safety & Shipping Review 2019," an annual report produced by German insurance company Allianz Global Corporate & Specialty SE (AGCS).

The drop was driven by a significant decline in activity in the global loss hotspot, South East Asia, and by a halving of weather-related losses (10) after quieter hurricane and typhoon seasons, AGCS said.

While this plummet in total losses is encouraging, the number of reported shipping incidents overall (2,698 in 2018) declined by less than 1 percent year-on-year, the insurer said. Machinery damage was the major cause, accounting for more than a third of the 26,000+ incidents over the past decade - twice as many as the next highest cause, collision.

"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," AGCS' Baptiste Ossena, global product leader for Hull & Marine Liabilities, said in a release.

"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," Ossena said.

The hotspots for the globe's worst accident locations remained the same as previous years, including the South China, Indochina, Indonesia, and Philippines maritime region (12 incidents) followed by the East Mediterranean and Black Sea (6) and the British Isles (4) regions. That pattern is not likely to change soon, AGCS found. Despite signs of improvement, Asia will remain a hotspot for marine claims due to its high level of trade, busy shipping routes, and older fleets, the report said.

Cargo ships (15) accounted for a third of vessels lost around the world in the past year, with sinking as the most common cause of ship losses, accounting for more than half (551) of the 1,036 lost over the past decade. Just 30 of those losses occurred in 2018.

Another cause of loss was fires, which have generated large losses on board with the number of reported incidents (174) trending upwards. This has continued through 2019 with a number of recent problems on container ships and three significant events on car carriers. The top cause is believed to be mis-declared cargo, including incorrect labeling or packaging of dangerous goods, AGCS said.

In other findings, the AGCS report listed an array of growing risks:

  • emissions compliance could bring challenges as regulations limiting sulphur oxide emissions beginning in 2020 are likely to have wide-ranging implications for cost, compliance, and crew,
  • political risk has heightened around the globe through conflicts, territorial disputes, cyber-attacks, sanctions, piracy, and even sabotage, as evidenced by recent attacks on oil tankers in the Middle East,
  • the growing number of incidents on larger vessels is concerning, since container-carrying capacity has almost doubled over a decade and a worst case loss scenario could now cost as much as $4 billion,
  • over-reliance on technology could be an issue, since accidents continue to happen due to avoidable mistakes such as crew who are distracted by being on their phones,
  • autonomous shipping continues to show progress, but that technology cannot be not a panacea if the root cause of incidents and losses is not addressed.

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