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Total losses likely to remain in ‘happy space’, says risk expert

Shipping will get safer still, but improvements will be step by step rather than continue dramatic pace of change over last decade and more, according to Rahul Khanna

The ISM code has put safety ‘squarely in front of every boardroom at every shipping company, classification society and insurer’, says AGCS head of shipping safety

TOTAL losses are set to remain at the historic lows seen in recent years, although further reductions are likely to be incremental rather than continuing the dramatic reduction witnessed over the last decade or so, according to the main author of the definitive annual report on the subject.

The ninth edition of Allianz Global Corporate & Specialty’s Safety & Shipping Review found that total losses in 2020 were the lowest ever for the third year in succession, with just 49 large ships lost worldwide, representing a 50% drop over 10 years.

The overall number of shipping incidents, at 2,703 compared with 2,818 in 2019, also saw a continued year-on-year decline, it added.

Rahul Khanna, global head of marine risk consulting at AGCS, said that the downward trend had been apparent since the report’s inception, but had probably reached a floor of around 50 total losses a year for the time being.

“This is not to say that we can’t improve further and a lot of effort is going on. But we are in a bit of a happy space, where we have achieved quite a lot. It’s definitely important for the industry to stay here and not start going back up again,” Capt Khanna said.

However, the pace of change from here onwards is likely to be gradual and may not be as apparent as seen in the past.

“Ideally, we should be looking for zero ships lost. But we all know that in this world we live in, that’s not a realistic scenario.”

Many factors have been at work, but in hindsight, the key turning point may have been the entry into force of the International Safety Management code in July 1998.

“I remember being on ships then and people laughed it off, saying, ‘That’s a lot of paperwork and it’s nothing more than lip service being paid to safety’. But over the years, it has put safety squarely in front of every boardroom at every shipping company, classification society and insurer.

“That — over the years — has changed mindsets quite a bit.”

There have also been technical improvements, and training is now better than before. Better targeting from Port State Control has reduced the ability of unscrupulous shipowners to get away with slackness on safety.

Machinery damage or failure was the top cause of shipping incidents globally, again accounting for 40%. Often this is because owners try to cut corners, for instance not using the correct spare parts.

“One of the issues we have seen in the recent past is the type of maintenance that has been carried out. It used to be time-based maintenance, for instance every thousand hours. Then it changed to condition-based monitoring, and now we are looking at predictive maintenance. We need to settle down on what engines really require,” said Capt Khanna.

These days, there are more electronics on board vessels, and this necessitates greater crew training.

Loss of containers at sea also spiked last year to over 3,000, disrupting supply chains and posing a potential pollution and navigation risk. The number lost is the worst in seven years.

Larger vessels, more extreme weather, a surge in freight rates and misdeclared cargo weights leading to container stack collapse, as well as the surge in demand for consumer goods, may all be contributing to this increase.

According to the AGCS report, the industry still faces a number of major challenges, including coronavirus, the resultant crewing crisis and the impact of those factors on the supply chain, and decarbonisation.

There are also issues arising from ever-larger vessels, as highlighted by the grounding of Ever Given and the subsequent six-day closure of the Suez Canal in March.

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