• Safety& Shipping Review 2020: 14 large ships lost in Asian waters in 2019,accounting for more than 33% of losses worldwide
• Globally,41 large ships lost in 2019, down by more than 20% year-on-year and almost 70%over a decade.
• Numberof shipping incidents (2,815) is up, as are claims from machinery issues. Ro-rovessel safety is a growing concern.
• Consequencesof coronavirus and a sustained economic downturn could threaten long-termsafety improvement and trigger an uptick in losses from cost-cutting measures, fatiguedcrew, idle vessels and weakened emergency response.
• Risinggeopolitical tensions, emissions rules and de-carbonization targets, mis-declaredcargo and fire incidents continue to pose risk challenges.

SINGAPORE - MediaOutReach - 15 July2020 - Asian waters accounted for a third of a large vesselslost at sea globally, even as large shipping losses are at a record low havingfallen by over 20% year-on-year, according to specialty insurer Allianz GlobalCorporate & Specialty SE's (AGCS) Safety& Shipping Review 2020. However, the coronavirus crisis couldendanger the long-term safety improvements in the shipping industry for 2020and beyond, as difficult operating conditions and a sharp economic downturnpresent a unique set of challenges.   

"Coronavirus has struck at adifficult time for the maritime industry as it seeks to reduce its emissions,navigates issues such as climate change, political risks and piracy, and dealswith ongoing problems such as fires on vessels," says Baptiste Ossena, Global Product Leader Hull Insurance, AGCS. "Nowthe sector also faces the task of operating in a very different world, with theuncertain public health and economic implications of the pandemic."

The annual AGCS study analyzesreported shipping losses over 100 gross tons (GT) and also identifies 10challenges of the coronavirus crisis for the shipping industry which couldimpact safety and risk management. In 2019, 41 total losses of vessels were reportedaround the world, down from 53, 12 months earlier. This represents anapproximate 70% fall over 10 years and is a result of sustained efforts in the areas of regulation, training andtechnological advancement, among others. More than 950 shipping losses havebeen reported since the start of 2010.

Top loss locations and most affected ships

According to the report, the South China,Indochina, Indonesia and Philippines maritime region remains the top losslocation with 12 vessels in 2019 and 228 vessels over the past decade -- one infour of all losses. The Japan, Korea and North China region saw 2 vessels lostin 2019 and is the third largest loss location overall with 104 since 2010. Highlevels of trade, busy shipping lanes, older fleets, typhoon exposure, and safetyissues on some domestic ferry routes are contributing factors. However, in2019, losses declined for the second successive year, mirroring a global trend.

Cargo ships (15) accounted for morethan a third of vessels lost in the past year, most of them in South East Asianwaters. Foundered ships (sunk/submerged) were the main cause of all totallosses, accounting for three in four (31). Bad weather accounted for one infive losses. Issueswith car carriers and roll-on/roll-off (ro-ro) vessels remain among thebiggest safety issues. Total losses involving ro-ros are up year-on-year, aswell as smaller incidents (up by 20%) -- a trend continuing through 202.

"The rise in number and severity ofclaims on ro-ro vessels is concerning. Ro-ros can be more exposed to fire andstability issues than other vessels," says Khanna. "Many have quick turnaroundsin port and a number of accident investigations have revealed that pre-sailaway stability checks were either not carried out as required, or were based oninaccurate cargo information. Too many times commercial considerations haveendangered vessels and crews and it is vital that this is addressed on shoreand on board."

Number of smaller shipping incidentson the rise

While total losses continue to seea positive trend, the number of reported shipping incidents (2,815) increasedby 5% year-on-year, driven by machinery damage, which caused over one in threeincidents (1,044). A rise in incidents in the waters of the British Isles,North Sea, English Channel and Bay of Biscay (605), meant it replaced the EastMediterranean as the top hotspot for the first time since 2011, accounting forone in five incidents worldwide. Similarly, incidents in the South China,Indochina, Indonesia and Philippines region also increased by 21 year-on-yearfor a total of 255 in 2019, making it the third highest region.

"We cannot lose sight of the fact that, while totallosses have reduced significantly, the total number of incidents increased year-on-year,"says Ossena. "It does not take much for a serious incident to result in a totalloss and, hence, the warning signs are there."

There were almost 200 reportedfires on vessels over the past year, up 13%, with five total losses in 2019alone. Mis-declaredcargo is a major cause. Taking steps to address this issue is vital as itwill only worsen as vessels become bigger and the range of goods transported grows.Chemicals and batteries are increasingly shipped in containers and pose a seriousfire risk if they are mis-declared or wrongly stowed.

Coronavirus challenges

The shipping industry has continuedto operate through the pandemic, despite disruption at ports and to crewchanges. While any reduction in sailings due to coronavirus restrictions couldsee loss activity fall in the interim, the report highlights 10 challenges thatcould heighten risks. Among these are:

• The inability to change crews is impacting thewelfare of sailors, which could lead to an increase in human error on boardvessels.
• Disruption of essential maintenance andservicing heightens the risk of machinery damage, which is already one of themajor causes of insurance claims.
• Reduced or delayed statutory surveys and portinspections could lead to unsafe practices or defective equipment beingundetected.
• Cargo damage and delay are likely as supplychains come under strain.
• The ability to respond quickly to an emergencycould also be compromised with consequences for major incidents which aredependent on external support.
• The growing number of cruise ships and oiltankers in lay-up around the world pose significant financial exposures, withmany of them anchored in typhoon-exposed areas in Asia or hurricane-exposedareas in North America.

"Ship-owners also face additionalcost pressures from a downturn in the economy and trade," says Captain Rahul Khanna, Global Head of MarineRisk Consulting at AGCS. "We know from past downturns that crew andmaintenance budgets are among the first areas that can be cut and this canimpact the safe operations of vessels and machinery, potentially causing damageor breakdown, which in turn can lead to groundings or collisions. It is crucialthat safety and maintenance standards are not impacted by any downturn."

Geopolitical tensions and cyberimpact shipping safety

Meanwhile, events in the Gulf ofOman and the South China Sea show political rivalries are increasingly beingplayed out on the high seas and shipping will continue to be drawn into geopoliticaldisputes. Heightened political risk and unrest globally has implicationsfor shipping, such as the ability to secure crews and access ports safely. Inaddition, piracyremains a major threat with the Gulf of Guinea re-emerging as the global hotspot,Latin America seeing armed robbery increase and renewed activity in the SingaporeStrait.

Ship-owners are also increasinglyconcerned about the prospectof cyber-conflicts. There has been a growing number of GPS spoofing attackson ships, particularly in the Middle East and China, while there have beenreports of a 400% increase in attempted cyber-attacks on the maritime sectorsince the coronavirus outbreak.

Other risk topics in the AGCS Safety& Shipping Review include:

• Targets to cut emissions will shapeshipping risk for years to come. The aim to halve CO2 emissions by 2050will require the industry to radically change fuels, engine technology and evenvessel design. Since January 1, 2020 allowable sulphur levels in marine fueloil were slashed. However compliance is not straightforward and teethingproblems could lead to a surge in machinery damage claims. Ultimately, de-carbonizationwill also have regulatory, operational and reputational implications. Progresson addressing climate change could stall with the focus on the coronaviruspandemic. This must not be allowed to happen.
• New technology not a panacea, but anincreasingly useful tool: Shipping tech can be a positive for safetyand claims and is increasingly being deployed to combat some of the riskshighlighted in the report -- from reducing the threat of fire on vessels throughtemperature monitoring of cargo to even potentially integrating suppressionsystems in drones in future. Increased use of industrial control systems tomonitor and maintain engines could significantly reduce machinery damage andbreakdown incidents, one of the biggest causes of claims.
• Unluckiestships -- The most accident-prone vessels of the last year were two GreekIsland ferries and a bulk carrier in North America, all involved in sixdifferent incidents.

About Allianz Global Corporate & Specialty

Allianz Global Corporate & Specialty (AGCS) is a leading globalcorporate insurance carrier and a key business unit of Allianz Group. Weprovide risk consultancy, Property-Casualty insurance solutions and alternativerisk transfer for a wide spectrum of commercial, corporate and specialty risksacross 10 dedicated lines of business.

Our customers are as diverseas business can be, ranging from Fortune Global 500 companies to smallbusinesses, and private individuals. Among them are not only the world'slargest consumer brands, tech companies and the global aviation and shippingindustry, but also wineries, satellite operators or Hollywood film productions.They all look to AGCS for smart answers to their largest and most complex risksin a dynamic, multinational business environment and trust us to deliver anoutstanding claims experience.

Worldwide, AGCS operates withits own teams in 32 countries and through the Allianz Group network andpartners in over 200 countries and territories, employing over 4,450 people. Asone of the largest Property-Casualty units of Allianz Group, we are backed bystrong and stable financial ratings. In 2019, AGCS generated a total of €9.1billion gross premium globally.

For more information please visit https://www.agcs.allianz.com/or follow us on Twitter @AGCS_Insurance and LinkedIn.

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