This downward trend continued last year. However, recent events, such as the collision of the oil tanker ‘Sanchi’ and the impact of the NotPetya malware on harbour logistics, underline that the shipping sector is being tested by a number of traditional and emerging risk challenges.
There were 94 total losses reported in 2017, down 4% year-on-year (98) – the second lowest in 10 years, after 2014. Bad weather, such as typhoons in Asia and hurricanes in the US, contributed to the loss of more than 20 vessels, according to the annual review, which analyses reported vessel losses of over 100 gt.
“The decline in frequency and severity of total losses over the past year continues the positive trend of the past decade. Insurance claims have been relatively benign, reflecting improved ship design and the positive effects of risk management policy and safety regulation over time,” said Baptiste Ossena, Global Product Leader Hull & Marine Liabilities, AGCS. “However, as the use of new technologies on board vessels grows, we expect to see changes in the maritime loss environment in future. The number of more technical claims will grow – such as cyber incidents or technological defects – in addition to traditional losses, such as collisions or groundings.”
There are multiple new risk exposures for the shipping sector. The changing climate brings new route risks, with fast-changing conditions in Arctic and North Atlantic waters posing new hazards. Environmental scrutiny is growing as the industry seeks to cut emissions, bringing new technical risks and the threat of machinery damage incidents at the same time. Shippers continue to grapple with balancing the benefits and risks of increasing automation on board.
The NotPetya cyber-attack caused cargo delays and congestion at nearly 80 ports, underlining the threat of cyber risks for the sector, AGCS said.
Almost a third of shipping losses in 2017 (30) occurred in the South China, Indo-China, Indonesia and Philippines areas, up 25% annually, driven by activity in Vietnamese waters.
This area has been the major global loss hotspot for the past decade, leading some media commentators to label it the ‘New Bermuda Triangle’. The major loss factors were weather, as well as busy seas and lower safety standards on some domestic routes. For example, in November 2017, Typhoon ‘Damrey’ caused six losses.
Outside of Asia, the East Mediterranean and Black Sea region was the second major loss hotspots (17) followed by the British Isles (8). There was also a 29% annual increase in reported shipping incidents in Arctic Circle waters (71), according to the AGCS analysis.
Despite decades of safety improvements, the shipping industry has no room for complacency, Allianz warned. Fatal accidents such as the ‘Sanchi’ tanker collision in January, 2018 and the loss of the ‘El Faro’ in Hurricane ‘Joaquin’ in late 2015 persist and human behaviour is often a factor.
It is estimated that 75% to 96% of shipping accidents involve human error (AGCS, Safety & Shipping 1912-2012 From Titanic to Costa Concordia). It is also behind 75% of 15,000 marine liability insurance industry claims analysed by AGCS – costing $1.6 bill (AGCS, Global Claims Review: Liability In Focus, 2017).
“Human error continues to be a major driver of incidents,” said Capt Rahul Khanna, AGCS’ Global Head of Marine Risk Consulting. “Inadequate shore-side support and commercial pressures have an important role to play in maritime safety and risk exposure. Tight schedules can have a detrimental impact on safety culture and decision-making.”
Better use of data and analytics could help. The shipping industry produces a lot of data but could utilise it better, producing real-time findings and alerts, Khanna believed. “By analysing data 24/7, we can gain new insights from crew behaviour and near-misses that can identify trends. The shipping industry has learned from losses in the past but predictive analysis could be the difference between a safe voyage and a disaster.”
Cyber incidents have been a wake-up call for the shipping sector. Many operators previously thought themselves isolated from this threat. “As technology on board increases, so do the potential risks,” warned Khanna. At the same time, new European Union laws such as the Network and Information Security Directive (NIS), which requires large ports and maritime transport services to report any cyber incidents and brings financial penalties, will exacerbate the fall-out from any future failure – malicious or accidental.
“The current lack of incident reporting masks the true picture when it comes to cyber risk in the marine industry,” said Khanna. “The NIS directive will bring more transparency around the scale of the problem.”
Climate change is impacting ice hazards for shipping, freeing up new trade routes in some areas, while increasing the risk of ice in others – over 1,000 icebergs drifted into North Atlantic shipping lanes last year (US Coast Guard International Ice Patrol), creating potential collision hazards.
Cargo volumes on the Northern Sea Route (NSR) reached a record high in 2017. Emissions rules bring problems-estimates suggest that the shipping sector’s emissions levels are as high as Germany’s, prompting a recent pledge to reduce all emissions by 50% in the long-term, alongside existing commitments to reduce SOx emissions by 2020.
As the industry looks to technical solutions to achieve these aims, there could be accompanying risk issues with engines and bunkering of biofuels, as well as operator training.
Legal, safety and cyber security issues are likely to limit widespread growth of crewless ships for now. Human error risk will still be present in decision-making algorithms and onshore monitoring bases.
Drones and submersibles have the potential to make a significant contribution to shipping safety and risk management. Their future use could include pollution assessment, cargo tank inspections, monitoring pirates and assessment of the condition of a ship’s hull in a grounding incident, AGCS said.