Shipping industry reports 54 losses in 2021 amidst challenges: Allianz
Annual losses down 57% since 2012 (127); 2021 represents big improvement on the rolling 10-year loss average (89).
The global shipping industry continued its long-term positive safety trend in 2021 with 54 reported total losses (till March 1, 2022) compared with 65 last year, according to the Safety and Shipping Review 2022 report by Allianz Global Corporate & Specialty (AGCS).
"Annual shipping losses have declined by 57 percent over the past decade since 2012 (127), while 2021 represents a significant improvement on the rolling 10-year loss average (89), reflecting the increased focus on safety measures such as regulation, improved ship design and technology and risk management advances."
The 2021 loss is more impressive due the fact that there are an estimated 130,000 ships in the global fleet today compared with some 80,000 some 30 years ago.
Cargo vessels accounted for half of all vessels lost in 2021 (27). Foundered (sunk) was the main cause of total losses across all vessel types during 2021, accounting for around 60 percent (32). Fire/explosion ranked second (15 percent, 8) with machinery damage/failure third (11 percent, 6). Extreme weather was reported as being a factor in at least 13 losses during 2021, the report said.
Ukraine invasion adds to challenges
The war has caused widespread disruption to global shipping, and is likely to exacerbate ongoing supply chain disruption, port congestion and crew crises caused by the Covid-19 pandemic.
"Despite the tragic situation in Ukraine, and the threat to seafarers caught up in the conflict, the direct impact on shipping from the war in Ukraine has so far been largely contained to the Black Sea," says Captain Rahul Khanna, Global Head of Marine Risk Consulting, AGCS. "However, the war is creating an additional burden on the maritime industry, which is already dealing with ongoing supply chain disruption, port congestion and a crew crisis caused by the pandemic.
"Trade with Russia and Ukraine will suffer, adding to already strained global supply chains. Longer term, sanctions and a reduction in trade with Russia, could result in the redrawing of some supply chains and trade routes, but this all takes time and comes at a cost."
At the start of the conflict, approximately 2,000 seafarers were stranded aboard 94 vessels in Ukrainian ports, according to the International Maritime Organization (IMO). "As of April 20, 2022, 84 merchant ships remained with nearly 500 seafarers on board. An estimated 1,500 seafarers have so far been repatriated with manning levels reduced, local ship keepers employed to replace crew, while some ships are in cold lay-up with no crew on board," the report said.
Marine insurance losses from the war in Ukraine are currently limited, says the report, although the conflict is likely to create uncertainty and legal questions for affected hull and cargo policies.
"We can predict the various scenarios under war cover but it is much harder to predict how non-war losses could develop for vessels trapped in Ukrainian ports and the Black Sea," says Justus Heinrich, Global Product Leader Marine Hull, AGCS.
The Ukraine invasion also impacts the global maritime workforce, which is already facing shortages as it comes out of the pandemic.
Problems with bigger ships
Large vessels continue to drive ever-higher exposures with fires, container and carrier losses, hazardous cargo, costlier salvage operations and issues with port of refuge leading to oversized losses and general average becoming more frequent, the report said.
"A number of recurring themes have emerged in major incidents in recent years, many of which are a consequence of the increased size of vessels," says Heinrich. "As vessels have grown larger, values at risk have increased while the environmental bar has been raised. However, regulation, safety management systems and salvage capabilities appear to have not always kept pace."
Many other concerns
The report also highlighted concerns about no let-up in container ship fire frequency, cargo misdeclaration, increasing number of car carrier incidents, lithium batteries as an emerging risk for shippers and general average becoming an increasingly frequent severity event. (General average is the long-standing principle of maritime law that all parties share in any damage or expenditure incurred while preserving property, for example, to save a vessel and its cargo during a storm. Under the terms of general average, which date back to the York-Antwerp Rules of 1890, cargo interests pay a contribution – based on a percentage of their own interests' value – to cover the damages or costs of others involved in a common maritime venture.)