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May 10, 2022
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- Total ship losses decrease, but the conflict in
Ukraine poses further challenges to the ship insurance industry
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- Allianz report on market outlook
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Last year all over the world there was the
total loss of 54 large ships compared to 65 in the year
previous. This is highlighted by the "Safety & Shipping Review"
2022" by Allianz Global Corporate & Specialty SE (AGCS)
pointing out that this represents a 57% drop in 10 years
(127 total ship losses occurred in 2012), while during the
early 90s the world fleet lost more than 200 ships
per year. The insurance company found that the reduction
of the total losses recorded in 2021 are made more
impressive by the fact that today there are about 130,000 ships in the
world fleet compared to about 80,000 30 years ago and such
progress reflects increased focus on security measures
through training programs, the improvement of the
ship design, technology and regulation.-
- The report specifies that in 2021 one in five (12) of the 54
total losses of ships occurred in the region of China
southern, Indochina, Indonesia and the Philippines and a
out of four in the last decade (225), as a consequence of the high
concentration in those areas of trade, of congested ports,
of older fleets and extreme weather conditions.
In 2021 the shipwreck (sinking/submerging) was the
main cause of total losses (32), equal to 60% of the figure
total.
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- Commander Rahul Khanna, Head of Marine Risk Consulting
of AGCS, found that if the number of total losses results in
considerable decline, the ongoing war in Ukraine is having multiple
consequences in terms of loss of life and ships, of
aggravation of the crisis of ship crew changes,
interruption of trade, weight of penalties and costs and
fuel availability: 'total losses -
observed Khanna - they are at historic lows, that is, about 50-75
per year in the last four years compared to over 200 per year
of the 90s. However, the tragic situation in Ukraine has
caused widespread problems in the Black Sea and elsewhere, aggravating the
supply chain situation already under pressure and also
existing disruptions caused by the Covid-19 pandemic,
port congestion and problems with changing ports
Man. At the same time - Khanna also specified - some
of the responses put in place to support the increase in
transport by sea, how to change the use or extend life
working of the ships, raise some perplexities. The
growing problems posed by large ships, such as fires, strandings and
complex rescue operations, continue to represent a
challenge for the owners and their crews".
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- The report focuses precisely on the fires on board the
ships, with flames that last year led to the loss
total of the ro-ro ship Felicity Ace and the ship
container ship X-Press Pearl. The document highlights that
in the last five years more than 70 have been reported
fires only on container ships, with flames that often occur
originate in the containers themselves and can be the result of
failure or misrepresentation of dangerous loads, such as substances
chemicals and batteries (about 5% of the containers shipped are composed
from undeclared dangerous goods). The fire of a large ship
can spread quickly and be difficult to
check and often the crew is forced to abandon
the ship, which can significantly increase the cost
the end of a claim.
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- Fires have also become one of the main factors of
damage to shipping companies carrying cars. Of
they usually start in the holds and are caused by malfunctions or
electric short circuits in vehicles and open bridges can
let them spread quickly. The growing number of vehicles
electrical transported by sea causes additional risks, given
that existing countermeasures may not respond
effectively in case of fire of this type of vehicles. The
losses can be very expensive given the value of the load and the
cost of wreck removal and depollution.
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- Referring then to the total number of claims, the report explains
that last year the highest number of naval accidents (668 out of a
total of 3,000 accidents) occurred in the region of
British Isles, the North Sea, the English Channel and the
Bay of Biscay. Worldwide, cargo ships (27)
represent half of the ships lost in the last year and the
40% in the last decade. Damage to machinery (1,311) accounted for
more than one in three incidents globally, followed
from collisions (222) and fires (178), with an increase in the number of
the latter by almost +10%.
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- The AGCS report also delves into the impact that is
having and may have the ongoing war in Ukraine
specifying that the invasion of Ukrainian territory by the
Troops of Russia will have further consequences on
a global maritime industry that is already facing various
shortcomings: Russian seafarers account for little more
of 10% of the world's workforce of 1.89 million
people, while about 4% come from Ukraine. At the end of the
contract period this staff may have difficulties
to return home or to reach the ships. A protracted conflict
could have deeper consequences, potentially
reshaping global trade in energy and other materials
First. A broad embargo on Russian oil could contribute
also to increase the cost of fuel and to have a
impact on its availability, pushing shipowners to
use alternative fuels. If these were of quality
below standards, you could get to have in the future
claims for compensation for machine failures. In addition
under this scenario, security agencies continue to
warn of an increased risk outlook
informatics for the maritime sector such as GPS blocking, spoofing
of the automatic identification system (AIS), problems with
electronic communications and interference.
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- "The insurance sector - justus pointed out
Heinrich, global product leader, Marine Hull, of AGCS - will see
probably a number of claims
in the field of war risk policies by ships
damaged or lost as a result of sea mines, missile attacks and
bombing in conflict zones. Insurers could
also receive claims under policies
marines with extension to the risk of war for ships and blocked cargoes
or trapped in Ukrainian ports and coastal waters."
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- The AGCS report notes, in particular, how the series of
Sanctions against Russian interests pose a challenge
and how the violation of sanctions can give rise to
severe repercussions, but also how their observance can
represent a considerable burden being difficult, for example,
determine the ultimate owner of a ship, cargo or
counterpart. In addition, the sanctions also apply to various parties
the transport supply chain, including banking and insurance,
as well as maritime support services, which makes the
compliance with sanctions even more complex.
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- The report then notes how the search for a haven port
is often a problem for ships in distress,
as happened to the X-Press Pearl which is
sunk as a result of a fire after two ports have
refused the ship shelter not being able or not wanting
unload a load of nitric acid. In addition, the problem of
search for a port of refuge and the timeliness of the
Rescue interventions is aggravated by the need for
have the necessary specialised recovery equipment,
tugs, cranes, barges and port infrastructure, which
adds time and cost to the response. The report recalls that the
rescue of the bulk carrier Golden Ray, which in 2019
overturned outside the US port of Brunswick,
required almost two years and a cost of more than 800 million dollars.
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- It so happens too often that what should be a
Manageable naval accident turns into a total loss.
Therefore the rescue has become a concern
growing and, in addition, environmental issues are
contributing to the increase in the costs of recovery and removal of
wrecks given that - Khanna noted - "it is expected that the
shipowners and insurers do more to protect
the environment and local economies. Previously - he recalled - a
wreck could be left on site if it did not represent a
danger to navigation, while now the authorities
they want the wrecks to be removed and the marine environment to be
restored, regardless of the cost.' This
translates into higher rescue expenses and in general
more significant losses, costs that are increasingly
supported by cargo owners and their insurers. To this
In this regard, the report notes that the general failure, i.e. the
legal process through which the owners of the cargo
share proportionally the losses and cost of the bailout
- explained Régis Broudin, Head of Marine Claims of
AGCS - has become a frequent event, as well as relevant,
with the growth in the number of large ships involved in fires,
strandings and losses of containers at sea compared to five years ago.
The document recalls that the general failure was declared
in both incidents at the container ship Ever Given,
which in March 2021 had blocked the Suez Canal, and at Ever
Forward, the container ship that last March was held
stranded in the United States and got stuck for more
one month before being released.
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