Analysis by Allianz Global Corporate & Specialty (AGCS), a division of global insurer Allianz, reveals that worldwide shipping losses declined by 50% in 2016 over the last ten years. However, with areas of concern appearing to be on the rise and budgets coming under increasing strain, the insurer warns against complacency in a challenging environment.
The news comes from the Allianz Safety & Shipping Review 2017, which, states that 85 large ships were lost worldwide in 2016, a decline of 50% over a decade, with South China and Southeast Asian waters being top loss locations.
Despite the welcomed decline in ship losses, Allianz cites that crew negligence, poor vessel maintenance, and the growing threat of cyber attacks are combining with economical and budget pressures to fuel additional challenges for the industry.
Baptiste Ossena, Global Product Leader Hull & Marine Liabilities, AGCS, said; “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.”
According to Ossena, “A ‘perfect storm’ of increasing regulatory pressure combined with narrowing margins and new risks is gathering.”
Pressure from rising environmental scrutiny is growing with record fines being implemented for vessel pollution. The cost of complying with new regulations scheduled to come into force in 2017, although welcomed, adds further pressure to the budgets of many already struggling shippers, says Allianz.
Political risks are also on the rise, warns the insurer, with greater activity hot spots showing signs of potentially impacting vessel routes, with areas such as Yemen and the South China Sea being cited by Allianz.
Cyber risk is growing across the majority of industries, and the analysis by Allianz reveals that for shippers offshore cyber-attacks are also significant. So despite reduced losses in 2016, clearly a number of obstacles and risks have the potential to hinder shipping business in the months and years ahead.
Duncan Southcott, Global Head of Marine Claims at AGCS, added; “Crew negligence and inadequate vessel maintenance are two potential areas of increasing risk, particularly if ship-owners opt to recruit crew with less experience and training, or choose to stretch maintenance work to the longest possible intervals in order to save money.”
The rise of technology is one development that continues to benefit the shipping industry, with electronic navigational tools and safety-enhancing technology already having a positive impact. But Allianz again warns of complacency and an over reliance on technology.
“Crews and officers must understand the shortcomings and limitations of technology. Sometimes replacing common sense decisions with digital inferences is not such a good idea,” said Captain Rahul Khanna, Head of Marine Risk Consulting at AGCS.
Regarding cyber, the report explains that so far no major incident has occurred due to a cyber-attack, which leads to complacency.
“The shipping sector doesn’t have a particularly heightened risk awareness when it comes to cyber. As no major incident due to a cyber-attack has taken place yet, many in the industry are still complacent about the risks.
“IT security should not be put on the backburner. If hackers were able to take control of a large container ship on a strategically important route they could block transits for a long period of time, causing significant economic damage,” said Khanna.