The number of large vessels lost fell to a record low of 26 in 2023. However, growing volatility and uncertainties from war and geopolitical events, the consequences of climate change, as well as ongoing risks resulting from the trend for larger vessels means the sector will have its work cut out to maintain this status quo in future, according to marine insurer Allianz Commercial’s Safety and Shipping Review 2024.
Thirty years ago, 200 large ships were lost annually. 2023’s 26 represents a decline of more than one third year-on-year and by seventy per cent over the past decade. But risks are increasing, warns Allianz Commercial.
‘The speed and extent of the way the industry’s risk profile is changing is unprecedented in modern times,’ says captain Rahul Khanna, global head of Marine Risk Consulting, Allianz Commercial. ‘Conflicts such as in Gaza and Ukraine are reshaping global shipping, impacting crew and vessel safety, supply chains and infrastructure, and even the environment. Piracy is on the rise, with a worrying re-emergence off the Horn of Africa. The ongoing disruption caused by drought in the Panama Canal shows how the changing climate is affecting shipping, all at a time when it is having to undertake its most significant challenge, decarbonisation.’
Also read: Baltimore bridge collapse and shipping safety
Highest total losses in Southeast Asia
During 2023, 26 total losses were reported globally compared with 41 a year earlier (and 200 thirty years ago). There have been more than 700 total losses reported over the past decade (729). The South China, Indochina, Indonesia and the Philippines maritime region is the global loss hotspot, both over the past year and decade (184). It accounted for almost a third of vessels lost last year (8).
The East Mediterranean and Black Sea ranks second (6) with activity up year-on-year. Cargo ships accounted for over sixty per cent of vessels lost globally in 2023. Foundered (sunk) was the main cause of all total losses, accounting for fifty per cent. Extreme weather was reported as being a factor in at least 8 vessel losses around the world in 2023, with the final total likely higher.
Also read: Allianz: Trend towards large ships intensifies
200 fire incidents
The number of shipping incidents reported globally declined slightly last year (2951 compared to 3036), with the British Isles seeing the highest number (695). Fires on board vessels – a perennial concern – also declined. However, there have still been 55 total losses in the past five years, and over 200 fire incidents reported during 2023 alone (205) – the second highest total for a decade after 2022.
Fires remain a key safety issue on larger vessels given the potential threat to life, scale of the damage, and the fact associated costs can be severe, a factor contributing to the long-term increase in the cost of large marine insurance claims.
Also read: Allianz: ‘Fire, collision, sinking and damaged cargo top causes of marine insurance losses’
Consequences of geopolitical conflicts
Recent incidents, such as in the wake of the conflict in Gaza, have demonstrated the increasing vulnerability of global shipping to proxy wars, disputes and geopolitical events, with more than 100 ships targeted in the Red Sea alone by Houthi militants in response to the conflict. Disruption to shipping in and around the region has persisted and is likely to remain for the foreseeable future. The re-emergence of Somali pirates, following their first successful hijacking since 2017, is an additional cause for concern.
‘Both the war in Ukraine and the Red Sea attacks have also revealed the increasing threat to commercial shipping posed by new technology such as drones, which are relatively cheap and easy to make, and difficult to defend against without a large naval presence,’ says Khanna. ‘Looking to the future, more technologically driven attacks against shipping and ports are also a distinct possibility. Reports of vessels experiencing GPS interference are increasing, particularly in the Strait of Hormuz, the Mediterranean and the Black Sea.’
Shadow fleet
The report also notes that in the three years since Russia invaded Ukraine, the gradual tightening of international sanctions on Russian oil and gas exports has contributed to the growth of a sizable “shadow fleet” of tankers, somewhere between 600 to 1400 vessels.
‘These are mostly older, often poorly maintained vessels that operate outside international regulation, often without proper insurance. This situation presents serious environmental and safety risks,’ explains Justus Heinrich, global product leader, Marine Hull, Allianz Commercial. Vessels have been involved in at least fifty incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills. ‘The cost of dealing with these incidents often falls on governments or other vessels’ insurers if one is involved in an incident.’
Rerouting brings risks and environmental challenges
Attacks against shipping in Middle East waters have also severely impacted Suez Canal transits – down by more than forty per cent at the beginning of 2024 – and trade. Coming so soon after the ongoing disruption caused by drought in the Panama Canal, this amounts to a double strike on shipping, causing yet more issues for global supply chains.
Whichever alternative routes vessels take, they face lengthy diversions and increased costs, also impacting their customers. Avoiding the Suez Canal adds at least 3000 nautical miles (over 5500 km) and ten days sailing time, rerouting via the Cape of Good Hope.
Rerouting also impacts the risk landscape and the environment. Storms and rough seas can be more challenging for smaller vessels used to sailing coastal waters, while infrastructure to support an incident involving the largest vessels, such as a suitable port of refuge or a sophisticated salvage operation may not be available.
Environmental gains may be lost as rerouted vessels increase speeds to cover longer distances. Red Sea diversions are already cited as being a primary contributor to a fourteen per cent surge in emissions in the EU shipping sector this year.
Also read: Allianz: Risks of offshore wind need to be managed
Green shipping challenges
Shipping contributes around three per cent of global emissions caused by human activities and the industry is committed to tough targets to cut these. Reaching these targets will require a mix of strategies, including measures to improve energy efficiency, the adoption of alternative fuels, innovative ship design and methods of propulsion.
Decarbonisation presents various challenges for an industry juggling new technologies alongside existing ways of working. For example, the industry will need to develop infrastructure to support vessels using alternative fuels, such as bunkering and maintenance, while at the same time phasing out fossil fuels. There are also potential safety issues with terminal operators and vessels’ crew handling alternative fuels that can be toxic or highly explosive.
‘Increasing shipyard capacity will also be key as the demand for green ships accelerates. Such capacity is currently constrained with long waiting times and high building prices,’ states Heinrich. Over 3500 ships must be built or refitted annually until 2050, yet the number of shipyards more than halved between 2007 and 2022. ‘Capacity constraints on shipyards could have a knock-on effect for repairs and maintenance, with damaged vessels or those with machinery issues potentially facing long delays.’
Machinery damage or failure is the most frequent cause of shipping incidents, accounting for over half of these globally in 2023 (1587).
Picture by Allianz Commercial.
Also read: Allianz: Fewer total losses, more over-sized losses and uncertainties
