Crew negligence and inadequate vessel maintenance are increasing areas of risk in the current tough shipping environment, according to Allianz Global Corporate & Specialty (AGCS) in its just-released annual “Safety at Sea” review.
The collapse of South Korea’s Hanjin Shipping in 2016 exposed the perilous state of some parts of the shipping industry, said AGCS, noting that an estimated 500,000 TEU, worth an estimated $12bn, was on more than 100 ships around the world when Hanjin filed for bankruptcy protection.
Nicolas Thoreau, Regional Head of Marine Hull, Asia, AGCS, said that Hanjin would not be a one-off, claiming that “we have recently seen more bankruptcies, ranging
from small to larger carriers. Mergers, acquisitions and alliances are more and more the new norm to building a sustainable future.” AGCS said that, according to Clarksons, the global commercial shipping fleet currently totalled 1,861.9m dwt, more than 50% larger than at the start of 2009. Global trade in 2016 by contrast was at its lowest level since 2009, according to the World Trade Organization.
“When debt levels are high and earnings are low, many ship-owners will look to make cost savings, with implications for maintenance budgets, training and crew,” warned Chris Turberville, Head of Marine Hull & Liabilities, UK, AGCS. He said that this raised concerns about how such measures could impact safety and claims activity further down the line.
“Crew negligence and inadequate vessel maintenance are potentially increasing areas of risk in the current tough economic shipping environment, particularly if ship-owners opt to recruit crew with less experience and fewer qualifications in order to save money, or choose to stretch maintenance work to the longest possible intervals,” said Duncan Southcott, Global Head of Marine Claims at AGCS.
Thoreau noted that the industry was seeing fewer large claims, but a greater number of attritional claims. “These are smaller claims that should not really happen – a large percentage are purely maintenance-related and should not fall into the scope of insurers”, Thoreau said.
Negligence/poor maintenance was now one of the top causes of liability loss in the shipping sector. making rigorous inspection and maintenance regimes crucial, according to Adrian Laflin, Senior Claims Expert, Marine at AGCS. “Obtaining buy-in from all levels of the workforce is important in creating a transparent and effective mechanism for reporting accidents and other areas of concern, learning lessons and, ultimately, implementing preventative measures as a result. As we all know, prevention is the best cure”, he said. http://www.agcs.allianz.com/insights/white-papers-and-case-studies/safety-and-shipping-review-2016/