But challenges persist, the report says
Maritime safety remains a critical concern as shipping plays a key role in carrying approximately 90% of world trade.
While significant progress has been made in the sector over the past decade, resulting in a record low number of large vessel losses last year, challenges persist, according to Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2023. Factors such as the risk of fire, the ripple effect of the conflict in Ukraine, the challenges of decarbonization, economic uncertainty, and the rising cost of maritime claims pose obstacles to the industry .
“Shipping losses fell to the lowest number we’ve seen in the 12-year history of our annual study, reflecting the positive impact of safety programs, training, ship design changes, and regulation over time,” said Captain Rahul Khanna, global head of marine risk consulting at AGCS. “While these results are satisfactory, more clouds appear on the horizon. More than a year after Russia’s invasion of Ukraine, the growth of the shadow oil tanker fleet is the latest consequence of challenging ship owners, their crew, and insurers.
“Fire safety and the problem of misdeclaration of dangerous cargo must be fixed if the industry is to benefit from the efficiency of ever-larger ships. Inflation is driving up the cost of hull, machinery, and cargo acquisition. Meanwhile, even if the decarbonization efforts of the industry are progressing, it remains the biggest challenge in the sector. Economic pressures can put important investments in the strategies of companies , as well as other safety initiatives, at risk.
The total loss is reduced
According to AGCS analysis, there will be 38 total vessel losses reported worldwide in 2022, compared to 59 last year, marking a 65% reduction in annual losses over the past decade. However, in the past 10 years, more than 800 total losses have been recorded, where South China, Indochina, Indonesia, and the maritime region of the Philippines are the global loss hotspots, amounting to 204 total. loss in the last 10 years. Fire/explosion and ship collision are among the main causes of loss.
Although total losses have decreased, the number of shipping casualties or incidents reported has remained constant. The British Isles saw the highest number of incidents, with machinery damage or failure being the leading cause worldwide, the AGCS report.
The report also highlighted an increase in fires at sea and on land, particularly due to the transport of new types of cargo such as electric vehicles and battery-operated items, which pose fire risks. , especially with the spread of potentially flammable lithium-ion batteries. . Misdeclaration of hazardous cargo is another concern that can hinder firefighting efforts and increase the risk of incidents.
Challenges in the sector
The ongoing conflict in Ukraine continues to affect the shipping industry, with the threat of collateral damage and the creation of a shadow tanker fleet by Russia and its allies. This fleet, which is made up of older ships operating under flags of convenienceand with lower maintenance standards, poses a significant risk to the global fleet and the environment, AGCS said.
In addition, decarbonization remains a major challenge for the sector, with shipping contributing approximately 3% of global greenhouse gas emissions. The transition to alternative fuels and technologies requires significant investment and collaboration between companies and insurers to mitigate risks.
Economic pressures and reduced demand in the wake of the pandemic have also affected the industry, potentially impacting maintenance budgets and risk management. In addition, rising commodity prices, higher labor costs, and supply chain disruptions have contributed to an increase in marine insurance claims, especially for hull and machinery.
In another hit for the industry, a recent report from Verisk noted that cargo theft is on the rise.
The challenges facing the shipping industry highlight the need for continued safety programs, regulatory measures, and investments to ensure maritime safety and reduce the risks associated with fire, hazardous cargo, geopolitical conflict, decarbonization, and economic uncertainty, AGCS said.
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