ALLIANZ GLOBAL CORPORATE & SPECIALTY SAFETY AND SHIPPING REVIEW 2018 An annual review of trends and developments in shipping losses and safety Allianz Global Corporate & Specialty Safety and Shipping Review 2018 04 Executive summary CONTENTS 08 Losses in focus CASUALTIES 18 Behavioral and cultural risk still needs addressing 20 Industry’s struggle with container ship fires continues 22 Safety responses round-up CLIMATE 24 Record-breaking hurricane season brings supply chain pressure 26 Superstorms pose future challenges for yacht market 28 Fast-changing Arctic and North Atlantic conditions bring route risks 30 Exploitation of the seas 31 Compliance with new emissions rules likely to be problematic TECHNOLOGY 34 Shippers get serious about cyber threat 36 Use of drones in the shipping sector set to take-off 38 Sensors could improve navigation, supply chain and cargo risk management 40 Autonomous shipping progresses but risk management and regulatory challenges remain SECURITY 42 Rising political risk brings safety fears 44 Piracy numbers hit record low but threat remains 46 Data and sources 47 Contacts Photo: iStock Shipping incidents in Arctic Circle waters are on the rise. Cover images: Indian Coast Guard, iStock, US Navy 2 3 Allianz Global Corporate & Specialty Safety and Shipping Review 2018 and Black Sea region is the second major loss hotspot (17), followed by the British SAFETY & SHIPPING REVIEW 2018 IN NUMBERS Isles (8) and the Arabian Gulf (6). Cargo ships (53) account for over half of all 1,129 total losses vessels lost during 2017, with activity up over past 10 years 30 losses in South China, Container ships are annually by 56%, driven by a rise in Indochina, Indonesia and getting bigger. Capacity foundering (sinking) incidents. Fishing and 90% of global 94 total losses in Philippines - the main hotspot has increased by almost passenger vessel losses are down year-on- 94 trade transported 2017. Second lowest Bad weather a 1,500% in 50 years year. Losses involving bulk carriers and by shipping total in a decade. factor in 21 losses tankers increased, with bulk carriers Major risks accounting for five of the 10 largest Major risks reported total losses by gross tonnage (GT). losses in 2017 Foundering has been the cause of over half of the 1,129 total losses reported over the past decade. It accounted for an even Busy seas Typhoons higher share of 2017 losses (65%), with bad Fire-fighting Cargo weather often a factor. Wrecking/stranding capability misdeclaration ranks second (13), followed by machinery damage/failure (8). Fire/explosion losses declined year-on-year (6). Piracy Safety There were 2,712 reported shipping 180 piracy standards incidents (casualties) in 2017, up slightly attacks in 20171. Salvage Ports of year-on-year by 3%, driven by a rise in Down year-on- challenges refuge machinery damage incidents – the top cause year. Lowest of casualties around the globe (42%). The total for 22 years 3 regions account for East Mediterranean and Black Sea region almost half of all losses is the most frequent location for incidents. Political risk 75% of shipping insurance losses are caused by human Behavioral and cultural risk needs ↓ error. Equivalent to $1.6bn addressing. Technology can help. Despite huge improvements in maritime safety, 53 losses - cargo ship ↓ fatal accidents at sea persist. Human error Allianz Global Corporate & Specialty ↑ ↑ Safety and 61 losses caused by 6 vessels lost Down Source: Allianz Global Corporate & Specialty most frequent vessel Up year- Up year- continues to be a major driver of incidents Shipping foundering in 2017. to fire in 2017. year-on- Review 2017 on-year on-year An annual review of trends and developments lost globally in 2017 year Additional references: 1 International Maritime and captains and crews are under in shipping losses and safety Bureau; Lloyd’s List Intelligence Casualty Statistics increasing commercial pressure as supply chains are streamlined. Tight schedules can have a detrimental effect on safety culture and decision-making leading to the “normalization of risk”. Better use of data and analytics can help to address this. The Shipping is the lifeblood of the global economy, Disparities remain. The South China, shipping industry has learned from losses in transporting approximately 90% of global trade. There Indochina, Indonesia and Philippines the past but predictive analysis is important 1 This sixth annual review are over 50,000 merchant ships trading internationally, maritime region has been the number one for the future. New insights from crew focuses on key developments EXECUTIVE carrying every kind of cargo, so the safety of vessels is area worldwide for major shipping behavior and near-misses can help identify in maritime safety and critical. The maritime industry saw the number of total incidents for the past decade, leading human error trends. Sensor technology can analyzes shipping losses shipping losses remain stable during 2017, declining slightly some media commentators to call it the also enhance risk management. For (of over 100 gross tons) during the 12 months prior to to 94 – the second lowest total over the past decade. “new Bermuda Triangle”. Last year, example, hull stress monitoring sensors December 31, 2017. It follows SUMMARY almost a third (32%) of losses occurred here could be linked to ship navigation in bad the Safety & Shipping Losses were down 4% compared with a year earlier (98) – (30) – up 25% annually. Not only are the weather, feeding real-time information on Review 2017 available at current figures show a significant improvement on the seas busy, they are also prone to bad structural integrity. However, over-reliance www.agcs.allianz.com/ insights 10-year loss average (113) – down 17%. Over the past weather – in 2017 Typhoon Damrey on technology on board must be avoided. decade, total losses have declined by more than a third contributed to a number of losses (6). In Continual training is imperative to ensure (38%), driven by improved ship design, technology and addition, safety processes on some the right balance is achieved between advances in risk management and safety. Recent lower domestic routes continue to lag behind technology and human intervention. shipping activity is also a factor. global standards. The East Mediterranean 1 International Chamber of Shipping 4 5 Allianz Global Corporate & Specialty Safety and Shipping Review 2018 Industry’s struggle with container will need to be disseminated faster ship fires continues: Major fires on than at present in future. Ice also container vessels are one of the most poses a significant hazard elsewhere. significant safety issues. The blaze on Over 1,000 icebergs drifted into North the ultra-large container ship (ULCS) Atlantic shipping lanes in 2017 – the Maersk Honam in March 2018 is one fourth consecutive “extreme” season4. of a number of incidents in recent Sailing in such conditions necessitates 21 years. Issues driving container ship fire specialist training for seafarers and exposures include the adequacy of fire- additional routing support. fighting capabilities as vessels become larger, misdeclaration of cargo, Exploitation of the seas increases: Photo: iStock Photo: US Navy Photo: US Navy losses from bad salvage challenges and time taken to The marine environment is seen as a Container-carrying capacity has increased by almost The USS Fitzgerald collided with Human error was a factor in the El Faro loss in late 2015, weather in 2017 access a port of refuge. ULCS provide resource, bringing environmental risks 1,500% in 50 years, bringing new risks. a container ship in June 2017. which has led to new safety legislation being proposed. economies of scale but the industry for shipping, such as pollution of fish needs to ensure risk management farms or even pirate fishing, which is masks the true picture in shipping human error entirely. It will still be standards are up to speed, as larger estimated to cost the global economy when it comes to cyber risk. New present in the algorithms that drive container ships are on their way. as much as $23.5bn a year5. regulations such as the European the decision-making of vessels, while Increasing maritime activity also Union’s Network and Information manned onshore bases will continue Record-breaking hurricane season brings potential new collision hazards, Security Directive will change that to control and monitor. Automation brings supply chain and yacht such as the growing number of and also exacerbate the fall-out from raises questions about who is at fault problems: Hurricanes Harvey, Irma and offshore wind farms in the North Sea any cyber failure. Many shipping in an accident – the manufacturer, Maria (HIM) and other severe weather – offshore wind In Europe grew 25% in companies are looking to improve software provider or the onshore events in 2017, such as Typhoons 2017; a record year6. cyber security on board, by separating bases. New kinds of losses, such as Damrey and Hato, show traditional IT systems for different functions, such cyber or product liability, could maritime risks should not be overlooked. New emissions rules problematic: as navigation, propulsion and loading. replace traditional claims. Technical AGCS analysis shows bad weather Increasing environmental and management and maintenance of directly contributed to at least 21 total sustainability pressures – such as the Drones ready for take-off: ships will also need to be rethought. losses in 2017 and this could yet new “Paris Agreement for the Unmanned aircraft systems are One of the main challenges for the increase further (see page 9). Fuel shipping industry”, which aims to finding a growing number of insurance industry in future will be market, cargo, cruise ship and port significantly cut all emissions – and applications in the maritime sector. dealing with more technical shipping operations were also disrupted, existing industry commitments to They are increasingly used by class claims, resulting from greater use of leading to natural catastrophes being reduce sulphur oxide emissions – will societies and marine surveyors to new technology.