By Abdi Ali
Published July 15, 2020
Though large shipping losses have fallen by more than 20% year-on-year, the Coronavirus disease (COVID-19) crisis could endanger the long-term safety improvements in the shipping industry for 2020 and beyond.
Safety & Shipping Review 2020, an annual report by marine insurer Allianz Global Corporate & Specialty SE (AGCS), says that difficult operating conditions and a sharp economic downturn due to the effects of COVID-19 could adversely affect the long-term safety improvements in the shipping industry in 2020 and beyond.
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“Coronavirus has struck at a difficult time for the maritime industry as it seeks to reduce its emissions, navigates issues such as climate change, political risks and piracy, and deals with ongoing problems such as fires on vessels,” says Baptiste Ossena who is in charge of Global Product Leader Hull Insurance at AGCS. “Now the sector also faces the task of operating in a very different world, with the uncertain public health and economic implications of the pandemic.”
This annual report shows that piracy remains a major risk for shipping, with the Gulf of Guinea re-emerging as the global piracy hotspot, accounting for 90% of global kidnappings reported at sea in 2019.
Given heightened political and economic uncertainty in the world today, the report says piracy is a threat that is likely to remain for the foreseeable future.
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“Hijackings by Somalian pirates may have reduced for now, but incidents have been increasing in West Africa and parts of Asia, where we see a worrying pattern of violent attacks against crew, as well as kidnappings,” says Captain Rahul Khanna who is in charge of Global Head of Marine Risk Consulting at AGCS.
In 2019, there were 162 incidents of piracy and armed robbery against ships worldwide, down from 201 in 2018. Somali pirates continue to possess the capacity to carry out attacks in the Somali basin and wider Indian Ocean. Some 47 pirate attacks were reported in the first three months of 2020, up from 38 in the same period the previous year, mostly targeting tankers, as well as container ships and bulk carriers.
“Piracy is typically local in nature but it can have a global geopolitical impact,” says Captain Andrew Kinsey, Senior Marine Risk Consultant at AGCS. “It has proved to be an easy business model, especially in parts of the world where governments are dysfunctional or where there is little rule of law. There is a strong connection between piracy and unstable governments, which provides opportunities for pirates to carry out attacks where the state is not strong enough to properly police its coastal waters.”
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The report identifies 10 challenges it says could heighten risks to the maritime sector by COVID-19
“Ship-owners face additional cost pressures from a downturn in the economy and trade,” says Rahul Khanna. “We know from past downturns that crew and maintenance budgets are among the first areas that can be cut and this can impact the safe operations of vessels and machinery, potentially causing damage or breakdown, which in turn can lead to groundings or collisions. It is crucial that safety and maintenance standards are not impacted by any downturn.”
According to the report, the South China, Indochina, Indonesia and Philippines maritime region remains the top loss location with 12 vessels in 2019 and 228 vessels over the past decade – one in four of all losses. High levels of trade, busy shipping lanes, older fleets, typhoon exposure, and safety issues on some domestic ferry routes are contributing factors. However, in 2019, losses declined for the second successive year. The Gulf of Mexico (4) and the West African Coast (3) rank second and third. The East African Coast is in the fourth spot.
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Cargo ships (15) accounted for more than a third of vessels lost in the past year, while foundered (sunk/submerged) was the main cause of all total losses, accounting for three in four (31). Bad weather accounted for one in five losses. Issues with car carriers and roll-on/roll-off (ro-ro) vessels remain among the biggest safety issues. Total losses involving ro-ros are up year-on-year, as well as smaller incidents (up by 20%) – a trend continuing through 2020.
“The rise in number and severity of claims on ro-ro vessels is concerning. Ro-ros can be more exposed to fire and stability issues than other vessels,” says Khanna. “Many have quick turnarounds in port and a number of accident investigations have revealed that pre-sail away stability checks were either not carried out as required, or were based on inaccurate cargo information. Too many times commercial considerations have endangered vessels and crews and it is vital that this is addressed on shore and on board.”
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The report says ship-owners are increasingly getting concerned about the prospect of cyber-conflicts as there has been a growing number of GPS spoofing attacks on ships, particularly in the Middle East and China, while there have been reports of a 400% increase in attempted cyber-attacks on the maritime sector since the outbreak of COVID-19.
Other risks tackled in the AGCS Safety & Shipping Review include cuttting down on carbon dioxide emissions by half by 2050 and the use of technology in shipping.