Canadian Underwriter

Global shipping losses down by 45% over a decade: Allianz Global Corporate & Specialty

March 21, 2016   by Canadian Underwriter

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Global shipping losses continue their long-term downward trend with 85 total losses reported worldwide in 2015, according to the Allianz Global Corporate & Specialty (AGCS) fourth annual Safety and Shipping Review 2016, released on Monday.

The shipping review, which analyzes reported shipping losses of over 100 gross tons, found that although the number of losses in 2015 remained stable – declining by just 3% compared with the previous year’s number of 88 – the year was the safest in shipping for a decade. Losses have declined by 45% since 2006, driven by an increasingly robust safety environment and self-regulation, AGCS said in a press release. [click image below to enlarge]

Cargo and fishing vessels accounted for more than 60% of ships lost globally, with cargo losses up for the first time in three years

Cargo (36) and fishing vessels (16) accounted for over 60% of ships lost globally, with cargo losses up for the first time in three years. The most common causes of total losses are foundering (sinking), accounting for almost 75% of losses (63), up 25, and often driven by bad weather.

There were 2,687 reported shipping incidents (casualties including total losses) globally during 2015, down 4%, AGCS reported. More than a quarter of all losses in 2015 occurred in the South China, Indochina, Indonesia and Philippines region (22 ships). Losses increased year-on-year, unlike other major regions. The eastern seaboard of the United States and North American west coast each reported two total losses in 2015.

For the first time in five years, piracy attacks failed to decline in 2015, according to the International Maritime Bureau. South East Asian attacks also rose, accounting for 60% of all incidents; piracy attacks in Vietnam surged year-on-year. “Pirates are already abusing holes in cyber security to target the theft of specific cargoes,” said Captain Andrew Kinsey, senior marine risk consultant with AGCS, in the release. “The cyber impact cannot be overstated. The simple fact is you can’t hack a sextant.”

With regard to bad weather, it was a factor in three of the five largest vessels lost last year, including the El Faro, one of the worst U.S. commercial maritime disasters in decades. “The fact that superstorms are causing ships to sink is concerning,” said Sven Gerhard, global product leader of hull & marine liabilities with AGCS. “We are seeing more and heavier natural catastrophe events. Weather routing will continue to be a critical component to the safe navigation of vessels.”

While the long-term downward trend in shipping losses is encouraging, AGCS said in the release, the continuing weak economic and market conditions, depressed commodity prices and an excess of ships are pressurizing costs, raising safety concerns. AGCS has seen an increase in frequency losses over the past year that can likely be attributed to some extent to this environment.

In addition, the appetite for ever-larger container ships has seen cargo-carrying capacity of the largest vessels increase by 70% over 10 years to more than 19,000 containers, the release said. Two “mega ships,” the CSCL Indian Ocean and APL Vanda, were grounded in February, raising questions about a more serious incident. “There are concerns commercial pressures in the salvage business have reduced easy access to the salvors required for recovery work on this scale,” AGCS concluded. “The industry may need to prepare for a US$1 billion+ total loss scenario.”