Safety and Shipping Review 2024: Record low for fleet loses during last year

Credit: Allianz Commercial

Allianz Commercial has published its Safety and Shipping Review for 2024, which finds that the sector will have its work cut out to maintain this status quo in future. 

According to Allianz, the fact that shipping is increasingly subject to growing volatility and uncertainties from war and geopolitical events, the consequences of climate change, as well as ongoing risks resulting from the trend for larger vessels, means the industry will have to face significant challenges.

The speed and extent of the way the industry’s risk profile is changing is unprecedented in modern times. Conflicts such as in Gaza and Ukraine are reshaping global shipping, impacting crew and vessel safety, supply chains and infrastructure, and even the environment.  

… said Captain Rahul Khanna, Global Head of Marine Risk Consulting, Allianz Commercial

Southeast Asia emerges as maritime region with highest total losses

As the report notes, thirty years ago, the global shipping fleet lost around 200 large vessels a year. This total fell to a record low of 26 in 2023, a decline of more than one third year-on-year and by 70% over the past decade.

Key data regarding losses

• Total losses in 10 years: 729
• Total losses in 2023: 26
• Decline over the past decade: 70%
• Cargo ships lost in 2023: 16 (over 60% of all vessels lost)
• Shipping incidents reported in 2023: 2,951
  • Top cause: Machinery damage
• Minimum number of total losses in 2023 where extreme weather was a factor: 8
• Most frequent month for total losses in 2023: October (4)
• Total losses caused by fire in the past five years: 55
• Most expensive cause of marine insurance claims: Fire

During 2023, 26 total losses were reported globally compared with 41 a year earlier. There have been more than 700 total losses reported over the past decade (729). The South China, Indochina, Indonesia and the Philippines maritime region is the global loss hotspot, both over the past year and decade (184). It accounted for almost a third of vessels lost last year (8).

The East Mediterranean and Black Sea ranks second (6) with activity up year-on-year. Cargo ships accounted for over 60% of vessels lost globally in 2023. Foundered (sunk) was the main cause of all total losses, accounting for 50%. Extreme weather was reported as being a factor in at least 8 vessel losses around the world in 2023, with the final total likely higher.

The number of shipping incidents reported globally declined slightly last year (2,951 compared to 3,036), with the British Isles seeing the highest number (695).

Fires onboard vessels – a perennial concern – also declined. However, there have still been 55 total losses in the past five years, and over 200 fire incidents reported during 2023 alone (205) – the second highest total for a decade after 2022.

Fires remain a key safety issue on larger vessels given the potential threat to life, scale of the damage, and the fact associated costs can be severe, a factor contributing to the long-term increase in the cost of large marine insurance claims.

Consequences of geopolitical conflicts

Recent incidents, such as in the wake of the conflict in Gaza, have demonstrated the increasing vulnerability of global shipping to proxy wars, disputes and geopolitical events, with more than 100 ships targeted in the Red Sea alone by Houthi militants in response to the conflict.

Piracy is on the rise, with a worrying re-emergence off the Horn of Africa. The ongoing disruption caused by drought in the Panama Canal shows how the changing climate is affecting shipping, all at a time when it is having to undertake its most significant challenge, decarbonization 

… Captain Rahul Khanna pointed out

Disruption to shipping in and around the region has persisted and is likely to remain for the foreseeable future. The re-emergence of Somali pirates, following their first successful hijacking since 2017, is an additional cause for concern.

Both the war in Ukraine and the Red Sea attacks have also revealed the increasing threat to commercial shipping posed by new technology, such as drones, which are relatively cheap and easy to make, and difficult to defend against without a large naval presence 

… explained Captain Rahul Khanna, while noting that looking to the future, more techologically driven attacks against shipping and ports are also a distinct possibility. Reports of vessels experiencing GPS interference are increasing, particularly in the Strait of Hormuz, the Mediterranean, and the Black Sea.

The report also notes that in the three years since Russia invaded Ukraine the gradual tightening of international sanctions on Russian oil and gas exports has contributed to the growth of a sizeable ‘shadow fleet’ of tankers, somewhere between 600 to 1,400 vessels.  

… said Justus Heinrich, Global Product Leader, Marine Hull, Allianz Commercial. Vessels have been involved in at least 50 incidents to date, including fires, engine failures, collisions, loss of steerage, and oil spills.

Rerouting brings risks and environmental challenges

Attacks against shipping in Middle East waters have also severely impacted Suez Canal transits – down by more than 40% at the beginning of 2024 – and trade. Coming so soon after the ongoing disruption caused by drought in the Panama Canal, this amounts to a double strike on shipping, causing yet more issues for global supply chains. Whichever alternative routes vessels take, they face lengthy diversions and increased costs, also impacting their customers. Avoiding the Suez Canal adds at least 3,000 nautical miles (over 5,500km) and 10 days sailing time, rerouting via the Cape of Good Hope. 

Rerouting also impacts the risk landscape and the environment. Storms and rough seas can be more challenging for smaller vessels used to sailing coastal waters, while infrastructure to support an incident involving the largest vessels, such as a suitable port of refuge or a sophisticated salvage operation may not be available. Environmental gains may be lost as rerouted vessels increase speeds to cover longer distances. Red Sea diversions are already cited as being a primary contributor to a 14% surge in emissions in the EU shipping sector this year.

Green shipping challenges

Decarbonization presents various challenges for an industry juggling new technologies alongside existing ways of working. For example, the industry will need to develop infrastructure to support vessels using alternative fuels, such as bunkering and maintenance, while at the same time phasing out fossil fuels. There are also potential safety issues with terminal operators and vessels’ crew handling alternative fuels that can be toxic or highly explosive.