Allianz’s annual Safety & Shipping Review has over recent years become a valuable and clear-sighted barometer of the state of the industry, and a moment to pause and take stock.
The global insurance giant’s marine team by inclination takes an objective and data-fuelled approach that successfully strips out much of the subjective emotional baggage that often clouds the issue.
Last year, Allianz highlighted that while losses were lower overall, there were additional risks that new technology will bring to shipping operations, and the unforeseen consequences that may trigger new types of casualties.
In its 2019 report published earlier this month, the Allianz Global Corporate & Speciality Division emphasised that there was no room for complacency despite a further fall in the number of total losses.
The number of total losses has now fallen to the lowest this century with only 46 in 2018, down from 98 a year earlier.
By comparison, there were 207 in 2000, and over the past 10 years there were 1,036.
The remarkably low number of losses was primarily attributable to relatively benign weather, with modest typhoon and hurricane seasons. Catastrophic weather events are out of our control, at least for now, so it is a factor that cannot be discounted in the future.
However, Allianz also gives credit for the lower losses to improvements in ship design and technology, tighter regulation, and stepped up risk and safety management.
More robust safety management systems and procedures on vessels is also a factor in preventing breakdowns, accidents and other mistakes from escalating into total losses, the insurer believes.
This should be welcome, and not only by insurers. Safer ships mean fewer crew injuries and deaths, and less pollution. It is unquestionably good news.
Yet, while the number of total losses may have fallen, the number of casualties or incidents remains a significant cause for alarm.
In 2018, there were 2,698 casualties, down just 1% on the previous year, with the Black Sea and Mediterranean highlighted as the global black spot for these incidents.
Digging into the data it has collected for nearly 20 years, Allianz identifies that about 40% of these incidents were caused by machinery damage or failure, and that the proportion has increased by over one-third in the past decade.
Of the more than 26,000 casualties during that period, some 8,862 have been caused by machinery breakdown — more than twice the next highest cause.
At a cost of more than $1bn over the past five years, it is the third-largest source of claims. Initiatives by equipment manufacturers and technology companies to install real time and detailed condition monitoring of machinery — with data streamed back for assessment on land — may in time improve the ability to manage such incidents.
But Allianz warns that incidents continue to occur due to an over-reliance on technology. In some instances, accidents happened when crew members were distracted by their phones.
With a generation of seafarers now having grown up trusting what they see on screens, there will continue to be a need for training and experience to develop a solid understanding of situational awareness and sound navigation, the insurer believes.
Other causes of casualties may be less easy to solve with data technology.
Threats from political hotspots remain a high-risk issue, as exemplified by the two sets of attacks on vessels in the Middle East Gulf in the past two months.
Managing such risks and preventing casualties and losses is a key challenge that has no single solution.
Other causes of fires and explosions, such as those involving hazardous cargoes, continued to bring heavy losses in 2018, with a total of 174 incidents.
Misdeclared cargo and incorrect labelling of dangerous goods carried in containers has been the cause of many fires, with the problem exacerbated by the increasing size of containerships. Scale can make detecting, accessing and fighting such fires significantly more difficult.
Onboard firefighting equipment is often inadequate to cope with the intensity and scale of such blazes, which, if they occur while a vessel is out of port, can quickly develop into a crisis situation.
Shipping’s loss record has improved greatly in the past two decades. It is a safer and cleaner industry, there can be no doubt.
However, as the analysis from Allianz makes clear, while it has improved, it is not yet a safe and clean industry. Many challenges remain and much more work needs to be done.
