June 19 - Shipping losses continue to decline but a perfect storm of regulation, cost saving and cyber security looms, says Allianz Global Corporate & Speciality's (AGCS) fifth annual safety and shipping review 2017.
Large shipping losses have declined by 50 percent over the past decade, largely driven by development of a more robust safety environment by shipowners, but crew negligence, inadequate vessel maintenance and cyber security are emerging as areas of concern, as economic pressures challenge budgets.
There were 85 vessels reported as total losses around the shipping world in 2016, down 16 percent compared with a year earlier, with preliminary figures indicating it set safety records in the sector with the lowest number of losses in the past ten years. The number of shipping incidents also declined year-on-year, by 4 percent with 2,611 casualties reported.
"While the long-term downward loss trend is encouraging, there can be no room for complacency," says Baptiste Ossena, global product leader hull and marine liabilities, AGCS. "The shipping sector is being buffeted by a number of interconnected risks at a time of inherent economic challenges."
According to the review, bankruptcies are rising and when debt levels are high and earnings are low, shipowners often seek to make cost savings on maintenance budgets, training and crewing levels, all of which can spike loss activity.
According to AGCS, negligence/poor maintenance is already one of the top causes of liability loss in the shipping sector and an increase in maintenance-related claims is observed. Implementing rigorous inspection and maintenance regimes is crucial.
While new navigational and monitoring technologies could help reduce the impact of human error - which has resulted in USD1.6 billion of losses in five years - the over-reliance on such technology brings risks. Captain Rahul Khanna, head of marine risk consulting at AGCS, said: "Crews and officers must understand the shortcomings and limitations of technology. Sometimes replacing common sense decisions with digital inferences is not such a good idea."
The threat of cyber attacks also continues to be significant. While most attacks to date have been aimed at breaching corporate security rather than taking control of a vessel, "The shipping sector doesn't have a particularly heightened risk awareness when it comes to cyber," says Khanna, with as many as 80 percent of offshore security breaches being estimated to be due to human error.