Increasing volatility and uncertainties from war, geopolitical events, climate change, and the trend toward larger vessels pose challenges for maintaining the shipping status quo, according to Allianz Commercial’s Safety and Shipping Review 2024.
Given that up to 90% of international trade is transported across oceans, maritime safety is critical. Thirty years ago, the global shipping fleet lost around 200 large vessels a year. This number fell to a record low of 26 in 2023, a decline of more than one-third year-on-year and 70% over the past decade.
"The speed and extent of the industry's changing risk profile is unprecedented in modern times. Conflicts such as in Gaza and Ukraine are reshaping global shipping, impacting crew and vessel safety, supply chains, and infrastructure, and even the environment,” Allianz Commercial global head of marine risk consulting Captain Rahul Khanna said.
“Piracy is on the rise, with a 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,” Khanna said.
In 2023, 26 total losses were reported globally compared to 41 a year earlier. Over the past decade, there have been more than 700 total losses (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 rank second (6), with increased activity year-on-year. Cargo ships made up over 60% of vessels lost globally in 2023. Foundering (sinking) was the main cause of all total losses, accounting for 50%. Extreme weather contributed to at least 8 vessel losses in 2023, with the final total likely higher.
The number of shipping incidents reported globally declined slightly last year (2,951 compared to 3,036), with the British Isles reporting the highest number (695). Fires onboard vessels, a perennial concern, also declined.
However, there have 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 due to the potential threat to life, the scale of damage, and associated severe costs, contributing to the long-term increase in the cost of large marine insurance claims.
Recent incidents, such as those following the conflict in Gaza, have highlighted the increasing vulnerability of global shipping to proxy wars, disputes, and geopolitical events, with more than 100 ships targeted in the Red Sea by Houthi militants in response to the conflict.
Disruption to shipping in and around the region has persisted and is likely to remain. The re-emergence of Somali pirates, following their first successful hijacking since 2017, is another cause for concern.
Khanna notes that both the war in Ukraine and the Red Sea attacks have revealed the increasing threat to commercial shipping posed by new technologies such as drones, which are relatively cheap, easy to make, and difficult to defend against without a large naval presence.
“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,” Khanna said.
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, numbering between 600 to 1,400 vessels. These are mostly older, often poorly maintained vessels that operate outside international regulation, often without proper insurance.
Attacks against shipping in Middle East waters have severely impacted Suez Canal transits, which were down by more than 40% at the beginning of 2024, affecting trade. This disruption comes soon after ongoing issues caused by drought in the Panama Canal, amounting to a double strike on shipping and causing more problems for global supply chains.
Vessels taking alternative routes face lengthy diversions and increased costs, impacting their customers. Avoiding the Suez Canal adds at least 3,000 nautical miles (over 5,500 km) and 10 days of sailing time when 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 incidents involving larger vessels, such as suitable ports of refuge or sophisticated salvage operations, may not be available.
Environmental gains may be lost as rerouted vessels increase speeds to cover longer distances. Red Sea diversions are cited as a primary contributor to a 14% surge in emissions in the EU shipping sector this year.
Shipping contributes around 3% of global emissions from human activities, and the industry is committed to tough targets to reduce these. Reaching these targets will require a mix of strategies, including measures to improve energy efficiency, adopting alternative fuels, innovative ship design, and new propulsion methods.
Decarbonisation presents challenges for an industry juggling new technologies alongside existing ways of working. For example, the industry must develop infrastructure to support vessels using alternative fuels, such as bunkering and maintenance, while phasing out fossil fuels. There are also potential safety issues with terminal operators and vessels’ crews handling alternative fuels that can be toxic or highly explosive.
Allianz Commercial notes that increasing shipyard capacity will be key as the demand for green ships accelerates. Such capacity is currently constrained, with long waiting times and high building prices. Over 3,500 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 (1,587).
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