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New Allianz report finds ship losses have declined progressively since 2015

Report finds that while less ships are being lost, prevalent risks include piracy, cyber-crime and geopolitical conflicts

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A new report by insurance giant Allianz has concluded that despite a significant decline in annual shipping losses over the past decade, the industry still faces challenges in the face of geopolitical conflicts and climate change among other things.

Decline in shipping losses

The main takeaway from the report is that shipping safety has improved noticeably in recent years, with a 70% reduction in annual shipping losses over the past decade.

In 2023, only 26 vessels over 100 gross tonnage (GT) were lost, compared to 41 in 2022 and 89 in 2014.

The report nonetheless highlights South China, Indochina, Indonesia, and the Philippines as the primary loss hotspots, accounting for nearly a third of global losses in 2023.

The region’s high shipping traffic, driven by substantial import and export volumes, is said to contribute to the frequency of incidents.

Geopolitical conflicts and their impact on shipping

Another risk factor covered in the report is the influence of geopolitical tensions, particularly in the Middle East and the Red Sea, which are said to pose significant risks to global shipping.

For example, the conflict in Gaza has led to over 100 attacks on ships in the Red Sea by Houthi militants, targeting vessels linked to Israel, the US, and the UK.These attacks have not only disrupted trade routes, but also endangered the safety and wellbeing of seafarers.

Wayne Steel, Senior Marine Risk Consultant at Allianz Commercial, says in the report that he fears the situation could lead to staff shortages:

“The Covid-19 pandemic was hard on crews, with many experiencing stress and fatigue having spent months at sea on extended contracts and unable to see family. Now they must worry about war and their own safety. In a world grappling with a shortage of maritime workforce, I fear this will impact the industry’s ability to attract talent and lead to future skills shortages.”

The report adds that the South China region is a “global loss hotspot” and warns that the situation will remain due to growing economic development and “simmering geopolitical risks”.

“A huge volume of imports and exports flow through the region, resulting in high levels of shipping traffic on the region’s sea lanes and in ports, which is reflected in the number of incidents. Together, the top three maritime regions account for almost 50% of loss activity over the past decade,” says Allianz’s report.

Climate change and environmental challenges

The report also claims that our changing climate has profound implications for shipping. Allianz states that the ongoing drought in the Panama Canal, one of the world’s busiest waterways, has severely reduced its capacity, causing significant disruptions to global supply chains.

Moreover, the report notes how drought conditions reduced navigability on the Amazon last year, causing an oil tanker to run aground in December.

“Climate change is having a big impact on cargo risks, and we need to find ways of understanding and mitigating the risk to ensure sustainability of cover. For example, cargo accumulation is a big challenge as extreme weather can lead to very large losses,” claims Justus Heinrich, Global Product Leader Marine Hull, Allianz Commercial.

In addition to this, the report highlights the environmental impact of rerouting vessels to avoid conflict zones. For instance, diverting ships from the Suez Canal to the Cape of Good Hope increases greenhouse gas emissions by an estimated 70% for a round trip from Singapore to Northern Europe.

The ‘shadow fleet’ phenomenon

Another interesting takeaway in the report concerns the so-called ‘shadow fleet’.

The report states that the tightening of international sanctions on Russian oil exports has led to the emergence of a ‘shadow fleet’ of tankers operating outside international regulations.

These vessels, often poorly maintained and uninsured, are said to pose significant safety and environmental risks. The report estimates the shadow fleet comprises 600 to 1,400 vessels, representing a substantial portion of the global crude oil tanker fleet.

According to Allianz, such vessels have been involved in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills.

It isn’t just Russia getting on the act either. Allianz writes that Iran and Venezuela have also used shadow tankers to circumvent sanctions and maintain oil exports.

The practice of ship-to-ship transfers in the open ocean and the disabling of AIS transponders to obscure vessel identities further complicate the regulatory landscape, writes Allianz.

“Shadow tankers pose a significant threat to other vessels and the environment,” says Captain Nitin Chopra, Senior Marine Risk Consultant at Allianz Commercial. “Despite efforts to crack down on these vessels, the number of tankers is actually increasing, and we have seen a number of groundings and collision incidents.

Chopra adds:

“As long as there are sanctions on countries like Russia and Iran, the shadow fleet looks here to stay. Given the age of the vessels in the shadow fleet, safety is a big concern. Often these vessels are at the end of their operational lives and are used in a high-risk business.”

Rise in piracy

Maritime piracy is yet another risk factor covered in the report. Allianz writes that piracy has seen a resurgence, with 120 reported incidents in 2023, up from 115 in 2022. The Gulf of Guinea remains a hotspot according to Allianz, who says the area accounts for the majority of vessel hijackings and crew kidnappings.

The report also notes the re-emergence of piracy off the Horn of Africa, with several vessels attacked in late 2023 and early 2024.

Offering examples, the report cites the Maltese flagged bulk carrier Ruen, which was hijacked last December in the Indian Ocean east of Somalia, as well as the Bangladesh-flagged bulk carrier Abdullah, which in March of this year was boarded and hijacked around 600 nautical miles off Somalia.

This increase in piracy incidents, in Allianz’s view, underscores the need for enhanced security measures and international cooperation to protect shipping routes.

“Pirates may be emboldened by what is going on in the Red Sea. With attention focused elsewhere, it opens up the possibility for them to restart their attacks around the Horn of Africa and hijack vessels. It can take months or even years to get the crew and vessels returned,” says Chopra.

Technological and cyber threats

Finally, Allianz warns that the shipping industry faces growing threats from technological advancements used in attacks.

Drones and cyber-attacks have become more prevalent, with reports of GPS interference and AIS spoofing increasing.

“Such weapons are relatively cheap and easy to produce, are becoming more precise, and can find their way into the hands of non-state actors, such as proxy groups or terrorists,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting, Allianz Commercial. “Warfare is changing, as are the weapons that can cause damage to ships. We have seen an increase in the use of drones and unmanned aerial vehicles, which are difficult to stop without a large naval presence.”

Allianz also argues that the potential for cyber-attacks to disrupt shipping operations and navigation systems highlights the need for strong cybersecurity measures and regular monitoring of technological weak spots.

“It is very difficult for individual vessels to protect themselves from drone attacks,” adds Captain Nitin Chopra. “Armed guards were part of the solution against Somali pirates in the past, but there is little that commercial shipping can do against attacks by guided missiles and drones. Owners can invest in counter-drone technology or consider safer alternative routes, but such options often come at a cost and may not always be practical.”

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