Although shipping losses declined again in 2014, the threat ofcyber attacks and large losses from ever-increasing ship sizes arenew threats to the maritime sector. As with other business sectors,the risk of cyber criminals targeting technology on board a vesselor attacking a major port could result in significant businessinterruption costs, notwithstanding liability or reputationallosses.

According to Allianz GlobalCorporate & Specialty SE’s (AGCS) third annualSafety and Shipping Review2015, which analyzes reported shipping lossesof over 100 gross tons, shipping losses continued their long-termdownward trend with 75 reported worldwide in 2014, making it thesafest year for shipping in 10 years.

[Related: Covering the global marinemarketplace]

Losses declined by 32% compared with the previous year and werewell below the 10-year loss average of 127. Since 2005, shippinglosses have declined by 50%. More than a third of 2014’s totallosses were in two maritime regions: South China, Indo China,Indonesia and the Philippines (17 ships) and Japan, Korea and NorthChina (12 ships). Cargo and fishing vessels accounted for over 50%of all losses.

The most common cause of total losses is foundering(sinking/submerging), accounting for 65% of losses in 2014 (49).With 13 ships wrecked or stranded, grounding was the second mostcommon cause with fires/explosions (4) third, but significantlydown year-on-year.

The U.S. eastern seaboard region did not register a total lossduring 2014, the second successive year this has occurred. TheNorth American west coast region also did not see a total lossduring 2014. There have been 783 shipping incidents (casualties) inthe North American west coast region since 2005—the 10^thhighest overall globally, just behind the Gulf of Mexico (806).

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Ports and ships become hacker targets

Protection against cyber risks is new for the shipping sector,which is highly interconnected and increasingly reliant onautomation. "A cyber-attack targeting technology on board, inparticular electronic navigation systems, could possibly lead to atotal loss or even involve several vessels from one company," saidKinsey. Other scenarios include cyber criminals targeting a majorport, closing terminals, or interfering with containers orconfidential data. Such attacks could also result in significantbusiness interruption costs.

Ever-increasing ship sizes

Container ship safety is in the spotlight with ever-increasingship sizes, as evidenced by the January 2015 inauguration of theworld’s largest-ever container ship, the MSC Oscar (19,224 teu). The length of fourfootball fields, it can carry 19,000 containers. That's big. Yetships as large as 22,000 teu are expected to be in servicesoon.

"Larger ships can also mean larger losses. The industry shouldprepare for a loss exceeding $1 billion in future featuring acontainer vessel or even a specialized floating offshore facility,"Kinsey said. Maximum exposure would not necessarily be limited tovessel and cargo value but could also include environmental orbusiness interruption backlash.

AGCS sees a number of risks for such mega-ships, including:

• Limited number of deep water ports that can operate suchvessels, leading to an increased concentration of risk;
• World-wide shortage of qualified seaman;
• Salvage and removal challenges.

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Passenger safety and crew levels in thespotlight

While the long-term downward trend in shipping losses isencouraging, recent casualties such as Sewol and Norman Atlantic have once again raisedsignificant concerns over training and emergency preparedness onpassenger ships three years after the Costa Concordia disaster. Sevenpassenger ships were lost during 2014, accounting for almost 10% oftotal losses.

"In many cases, construction of the vessel is not the only weakpoint. These two incidents underline a worrying gap in crewtraining when it comes to emergency operations on ferries orpassenger ships," says Captain Andrew Kinsey, Senior Marine RiskConsultant, AGCS.

The general shipping trend for smaller crews means seafarers arebeing asked to do more with less. Minimum manning levels reduce theability to train people onboard, which can provide invaluableinsight and should not become the normal day-to-day level for safeoperations.