The maritime industry is being buffeted “by a number of interconnected risks at a time of inherent economic challenges”, according to Allianz Global Corporate & Specialty (AGCS) in its just-released annual “Safety at Sea” review.
“We continue to see improvements in maritime safety, but the price of safe navigation is constant vigilance. Maritime trade may appear a constant but it is not. There are new risks and change driven by internal and external forces,” said Captain Andrew Kinsey, Senior Marine Risk Consultant at AGCS.
“The shipping industry is moving in the right direction in addressing its environmental responsibilities. But this comes at a huge cost, as shipping is already reeling from severe economic pressures,” said Captain Rahul Khanna, Head of Marine Risk Consulting at AGCS, adding that “there can be no turning back from environmentally-sustainable shipping.”
Changes in piracy risk, increasing tensions in the South China Sea and conflict in Yemen, plus developments in technology, with increased automation and growing reliance on e-navigation. “… are all additional challenges and pressures hitting the maritime industry at a time of economic stress – when the industry is least able to cope and absorb additional risk,” said Kinsey, noting that the maritime sector was “entering a period of considerable change and unrest from economic pressures, technology and political factors. There is a perfect storm of increasing regulation and narrowing margins.”
Although these risks and challenges seemed unrelated, they were in fact interconnected, and could amount to fundamental changes in maritime risks in the future, said Kinsey.
Political risks in the Middle East or Asia could influence major shipping routes, with a shift in favour of the Panama Canal or, long-term, into Arctic waters. Economic pressures and environmental concerns could also impact shipping routes, while at the same time encouraging ship owners to seek efficiencies in technology and larger vessels.
For insurers, this would mean changes to the way underwriters assess risks in the maritime industry, Kinsey said. “Insurers base their underwriting on historical data. But we are increasingly having to evaluate risk for new types of vessels and technology, transiting new routes and using new forms of cargo movements. There will be new risks and new practices”. http://www.agcs.allianz.com/insights/white-papers-and-case-studies/safety-and-shipping-review-2016/