AGCS warned the pandemic could endanger long-term safety improvements in the maritime industry despite large shipping losses being at a record low, having fallen by over 20% year-on-year.
The company’s global product leader hull insurance, Baptiste Ossena said “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.”
“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.”
In 2019, 41 total losses of vessels were reported around the world, down from 53 on the preceding 12 months – a 70% decline over 10 years. More than 950 shipping losses have been reported since 2010. AGCS attributes the decline to sustained efforts in the areas of regulation, training and technological advancement.
Asia Pacific remains the top loss location with 12 vessels in 2019 and 228 vessels over the past decade, accounting for one in four of all losses. The high levels of trade, busy shipping lanes, older fleets, typhoon exposure, and safety issues on some domestic ferry routes are contributing factors.
AGCS global head of Marine Risk, Captain Rahul Khanna said “It is crucial that safety and maintenance standards are not impacted by any downturn.”
He noted that as owners face decreased revenues, the historical record suggests 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.”
Though the industry has continued to operate through the pandemic, despite disruption at ports and to crew changes, the Allianz report highlights challenges that could heighten the risks:
- The lack of crew changes might lead to an increase in human error on board vessels.
- The disruption of essential maintenance and servicing increases the risk of machinery damage which is already one of the major causes of insurance claims.
- Reduced/delayed surveys and port inspections could lead to unsafe practices or undetected defective equipment.
- The growing number of cruise ships and oil tankers in lay-up around the world pose significant financial exposures, due to the potential threat from extreme weather, piracy or political risks.
The review also notes that events in the Gulf of Oman and the South China Sea show political rivalries are increasingly being played out on the high seas and that shipping is likely to continue to be drawn into geopolitical disputes.
Heightened political risk and unrest globally has implications for shipping, such as the ability to secure crews and access ports safely. In addition, piracy remains 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 Singapore Strait.
Shipowners are also concerned about the prospect of cyber conflicts. 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 coronavirus outbreak.
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