Everybody Wins from Shipping Risk Reduction

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By Captain Andrew Kinsey, the Senior Marine Risk Advisor at Allianz Global & Corporate Specialty

 

We hardly ever consider the route that an Amazon package takes to get to our door when it arrives.

Your clothing or school supplies have probably gone a long way across the ocean on a ship.

 

90 percent of global trade is sent internationally, hence the proverb “there’s many a slip between the cup and the lip” is applicable.

Between the point of origin and the destination, a lot may go wrong, thus lately Marine insurers have been closely monitoring changes in our climate, our economy, and our public health that could affect the likelihood of a successful delivery.

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The annual Safety and Shipping Review published by Allianz provides essential information for marine insurers about trends and advances in shipping losses and safety.

Some of the main highlights are listed here.

 

Seaborne losses

 

Let’s start by taking a look at marine vessel losses, where the trend remains steady.

In 2020, there were 49 total losses of 100 gross tons or more, up from 48 the previous year.

Give credit to improved safety procedures, legislation, ship designs and technologies, and developments in risk management. Behind the numbers, though, are a lot of unpredictable factors, including severe weather, equipment failure, fires, and even piracy.

The detection and suppression of fires on large ships can be improved by ship operators, and they can also guarantee that the machinery has been checked over and is in good operating order.

Additionally, through better forecasts and vessel routing, weather impacts can be reduced.

 

Shipping containers lost at sea are another major problem for insurance.

Due to bad weather and heavy cargo, more than 1,000 people fell overboard in the first few months of last year.

Another factor is the increase in consumer demand, which has led to the stacking of containers at record heights on ships, raising concerns about their security.

Compared to a longer-term average of 1,382 containers per year, more than 3,000 containers were lost at sea overall in 2020.

 

impact of a pandemic

 

The global pandemic follows, which hasn’t had much of an impact on Marine insurance claims thus far.

As more ships are placed back into service and we start to notice the consequences of postponed maintenance, it’s entirely feasible that claims will rise.

Another major worry is that public health regulations keep sailors confined to their ships in ports, delaying crew changes and medical care.

Crew tiredness causes human mistakes, which is a primary factor in numerous losses.

 

All supply chain participants, including cargo owners, should take rapid action in response to these issues.

One possibility is to classify merchant mariners as critical workers, allowing them to acquire immunizations and move around with ease.

 

larger ships, greater issues

 

In international shipping, size does matter.

Do you recall the ship that was over three months in the Suez Canal?

The Ever Given disaster served as a striking example of how challenging it is to release big vessels.

Someone must pay when more tools and labor are required.

Not to mention the cost of supply chain disruption to society and the economy.

This holiday shopping season, there’s a good chance that we’ll see many “products unavailable” and empty shelves.

 

So why are there so many larger vessels if they lead to greater issues?

It’s all about economies of scale and fuel efficiency, therefore shipping corporations shouldn’t be held accountable for trying to adhere to stricter environmental standards and cut expenses.

Significant vessels, however, are problematic for the supply chain since they frequently overwhelm ports when a large number of containers are unloaded at once.

 

The size of the vessel also directly relates to the extent of the possible loss, which is a problem that keeps marine insurers up at night.

Cargo is frequently incorrectly or inadequately declared, which can cause fires.

For instance, the risk of igniting increases significantly if chemicals, batteries, or self-igniting charcoal are not stored appropriately.

Additionally, if the item was never properly declared, the crew wouldn’t know what to do in an emergency.

 

Large vessels’ insufficient fire detection and firefighting equipment is a contributing factor to the issue, and the International Union of Marine Insurers (IUMI) is mobilizing partners to set more rigorous regulations.

 

The risks connected to international shipping initially seem to be changing targets.

But closer examination reveals patterns and trends that, when thoroughly examined, can increase loss mitigation and lessen the possibility of “slips” in transportation.

 

Captain Andrew Kinsey is a Senior Marine Risk Consultant at Allianz Global & Corporate Specialty and serves as chair of the Triple-I Associate Member organization’s technical services committee.

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