Allianz Global Corporate & Specialty (AGCS) recently released its second annual Safety and Shipping Review, which analyzes reported shipping losses of vessels over 100 gross tons. The report revealed that 2013 losses had declined by 20% from 2012 figures to 94 large losses. The 2013 accident year also represents a significant improvement on the previous 10-year loss average, with total worldwide shipping losses declining 45% since 2003.
With over 90% of global trade carried by sea, the safety of international shipping and routes is critical to the health of the global economy. And although the long-term downward trend in shipping losses is encouraging, there is more work to be done to improve the overall safety of these vessels as well as their cargo, crew and passengers.
While foundering (sinking or submerging) remains the most common cause, accounting for almost three-quarters of all losses, the report identified several emerging risks that are becoming a concern for the marine industry.
Mega Ships Pose New Risks
Last year marked the arrival of Mærsk's Triple-E class, the largest container vessel on record, over 400 meters long and boasting container carrying capacity in excess of 18,000 TEU (20- foot container). This trend is set to continue. AGCS estimates capacity growth by around 30% every four to five years, meaning the arrival of 24,000 TEU carriers can be anticipated around 2018. These "mega ships" pose unprecedented risks and challenges in terms of operating safety and salvage efforts in the event of a casualty.
As very few ports in the world have the necessary infrastructure to handle the Triple E series, they have to restrict the number of containers that can be loaded for some calls. While ports are working to improve handling capacity, this issue raises the wider concern on the number of ports that can offer a safe place of refuge to a mega ship in distress. The current practice concerning places of refuge is a concern to insurers and while regulation exists to require states to offer a place of refuge, these are not being applied in all cases.
New Fuels Increase Safety Questions
The demand for larger ships is in part related to the operational savings that they offer and the drive for ever greater efficiencies and cost savings, in tandem with a strict regulatory environment, has led to a rise in demand for "greener" fuels.
Bio-fuels, hydrogen, compressed natural gas and liquefied natural gas (LNG) all offer viable solutions to power the global shipping fleet. Of these fuels, LNG has captured the imagination of shipping lines. Last year Bloomberg reported that the global fleet of 42 LNG-powered ships will almost triple by 2014 and increase 42-fold to almost 1,800 vessels by 2020, according to DNV GL, the largest company certifying the merchant fleet for safety.
Refueling of these ships is expected to take place at ports, and some European and Asian ports are already preparing themselves to supply LNG. There are safety concerns with this move, as the industry will see the rise of ports that have never previously handled LNG providing bunkering (fueling) stations in the port.
Experts question whether this shift might compromise LNG's unblemished safety record. The Lloyd's Market's Joint Hull Committee has nominated a committee to find out more about the risks associated with LNG as a fuel, which will complement research already completed, including the creation of a code by classification societies on gas-fueled ships.
Arctic aspirations
Although innovative designs and alternative fuels can help improve profitability, potential new trading routes offering reduced passages further boost savings. One area that is being keenly watched is the Arctic, but an interest in the creation of trade routes in this region as the permanent ice pack recedes brings with it environmental protection concerns, salvage restrictions, navigation complications, and operations in freezing conditions.
According to the IMO, there has been a tenfold increase in the number of vessels using the Northern Sea route (a shipping lane officially defined by Russian legislation running from the Atlantic Ocean to the Pacific Ocean) during recent years, with 46 ships recorded in 2012, compared with 34 in 2011 and only four in 2010. The latest figures show 71 large ships, working mostly with Russian icebreakers, navigated the route in 2013, but Russia expects a 30-fold increase in shipping by 2020, and ice-free water over most of its length by 2050.
Meanwhile, the Arctic Institute notes that the polar research institute of China has suggested that by the year 2020, 5% to 15% of China's trade value—about $500 billion—could pass through the Arctic. Development of logistics, supplies and infrastructure, special qualifications for ships' officers, and the provisions of adequate ice-breaking capacity all need consideration in such a remote area, as do rescue and salvage operations. Navigational technology in the high north is constrained as GPS is not dependable at that latitude.
Additional concerns include the lack of good charts, communication systems and other navigational aids, all of which pose challenges for mariners. Indeed, shipping casualties (incidents) in the broader Arctic waters have increased to an average of 45 per year during 2009 to 2013 from only seven during 2002 to 2007. Damage to machinery caused a third of these incidents, higher than the average elsewhere, reflecting the harsher operating environment.
In recognition of the shift in traffic to these inhospitable regions, the IMO has been proactively working to establish a Polar Code. This draft international code of safety for ships operating in polar waters will cover the full range of design, construction, equipment, operational, training, search and rescue and environmental protection matters relevant to ships operating in the inhospitable waters surrounding the two poles.
To view the full AGCS Safety and Shipping Review 2014, go here.
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