Large shipping losses are currently at their lowest level this century, according to a report by Allianz Global Corporate & Specialty SE (AGCS), although the overall number of reported incidents shows little decline.
In 2018, AGCS recorded 46 total losses of vessels around the shipping world, down from 98 in the previous year, driven by a significant decline in activity in South East Asia and much lower weather-related losses due to quieter hurricane and typhoon seasons.
While this decline in losses is encouraging, the overall number of reported shipping incidents declined less than 1% year-on-year, with 2,698 recorded in 2018.
Machinery damage has accounted for more than a third of the 26,000+ incidents recorded over the past decade, around twice as many as collision, which is the next highest cause.
According to AGCS, machinery damage is also one of the most expensive causes of marine insurance claims, accounting for more than $1 billion in losses over the past five years.
“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 at 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,” he explained.
“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 South China, Indochina, Indonesia and Philippines maritime region continued to be the top loss location in 2018, with one in four vessel losses occurring in the area, followed by the East Mediterranean and Black Sea, and the British Isles.
Looking ahead, AGCS believes the planned January 2020 regulations to limit sulphur oxide emissions will have a profound effect on the shipping industry, with a potential increase in machinery breakdown due to the introduction of new fuels.
Political risk has also heightened around the globe and increasingly poses a threat to shipping security, trade and supply chains through conflicts, territorial disputes, cyber attacks, sanctions, piracy, and even sabotage.
