Despite a record reduction in freight losses in 2018 to the lowest level in the century, industry is facing increased risks from a changing climate and a number of environmental problems, according to a report from Allianz Global Corporate & Specialty SE, which was released on Tuesday.
Current historical flood in the Midwest after heavy rain and snow melting, record high water levels along the Mississippi River, and aging infrastructure show "these complex interlaced nature," says Andrew Kinsey, New York-based senior risk consultant, Marine for Allianz in an interview with Business Insurance before the release of the report.
"We have never encountered a situation where we had the Mississippi River at such a high level at the beginning of the hurricane season. Instead of the level being at four feet it is now over 1
Shippers are also starting to implement lower sulfur fuels to comply with new emission regulations from 2020, which means that ships have problems maneuvering under these conditions because their engines do not work as efficiently with lighter fuels, Captain Kinsey says.
Although these regulations are intended to help the environment, current conditions are such that it "adversely affects our risk profile
Even without hurricane, insurance companies see a variety of loss scenarios that affect both cargo and hull interests, agriculture and business interruption," says Kinsey Business Insurance
In its security and freight survey in 2019, Allianz said that changing weather patterns led to ship embankments and collisions in the United States and the supply chain in disturbances in Europe, while the changing climate opens new routes in inaccessible areas such as the Arctic,
Insurance companies are also concerned about a potential increase in machine breakdown requirements after the introduction of sulfur dioxide fuels if the transition is not well managed, Allianz said in the report.
Increased policy risks for ship security, ongoing pro blemishes with large container ships and fires and a lack of improvement in overall shipping events are among the other concerns facing the shipping sector, according to the report.
The number of total shipping rates decreased by more than 50% to 46 in 2018, from 98 in 2017, due to lower hurricane and typhoon activity and improved loss experience
South China, Indochina, Indonesia and the Philippines are still the best region for total losses, says Allianz.
Since 2009, shipping pressures have been reduced by 65% driven by better ship design and technology, intensified regulation and progress in risk management and security, the report reported.
However, there were 2,698 rescue accidents or incidents in 2018, a decrease of less than 1% remains "challenging," the report says.
Machine damage / failure is the main cause of freight accidents globally and accounts for 40%. Such incidents increase by one-third over the past decade and cause $ 1 billion in damage Over five years, Allianz said in the report.
"A growing number of engine manufacturers are now installing" Internet of Things "devices to collect real-time data that can be used to make recommendations to ships and perform maintenance, potentially preventing divisions before they happen," it said.
Fires and explosions on board continue to generate huge losses with an event occurring every 60 days on average, Allianz said. The fire activity increased in 2018 by 174 reported incidents, a trend that continued until the beginning of 2019, according to the report.
"Incorrect cargo, including incorrect labeling and packaging of dangerous goods, is believed to be a cause of a number of fires and is a problem that is exacerbated by larger vessels, which can make problems more difficult to detect, locate and combat," the report says.
Although technological advances such as autonomous freight are expected to improve maritime safety by removing crew from danger innovation should not be driven primarily by efficiency and accounting, Allianz says.
"Innovation and technology are not a paradise if the cause of incidents and losses is not addressed," the report says.
Technological advances also mean "Cyber losses will become an increasingly significant element of marine advancement," says Allianz.
Human error remains an important security issue and an underlying factor in many claims, and about $ 1.6 billion in insurance losses for maritime transport involved some form of human error based on an analysis of nearly 15,000 claims, "the report said.
In October 2018, a Tunisian ferry Ulysse collided with the container ship CSL Virginia in the Mediterranean Sea after an officer on the watch appeared to have been distracted by a mobile phone, the report said.