Machinery damage incidents and costs rising: AGCS

Machinery damage is the top cause of shipping incidents over the past decade – a trend that is unlikely to change anytime soon, given rising repair costs and concerns over maintenance levels and larger vessels, said Allianz’s commercial insurance arm AGCS in its Safety Shipping Review 2019.

On September 25th 2016 Ro-ro passenger ferry MV Hebrides hit pontoons and ran aground in Scotland after the vessel suffered a technical failure. A September 2017 investigation into the incident found that neither the ship’s engineers nor shore-based service engineers had access to the relevant service instructions.

In June 2018, the US Coast Guard warned that fuel contamination at the Port of Houston was causing engine problems – the problem subsequently spread to other regions as far apart as Singapore and Panama and is thought to have affected hundreds of vessels.

In March 2019 cruise ship Viking Sky, which was carrying almost 1,400 passengers and crew, narrowly avoided running aground off western Norway after struggling with engine problems in bad weather. Almost 500 people had to be winched to safety. The engine problems have been linked to a lack of lubricating oil, possibly caused by the vessel’s excessive rolling in waves.

Historically, machinery damage (including engine failure) is one of the largest causes of marine insurance claims by both value and frequency, according to AGCS. Based on analysis of more than 230,000 industry claims between July 2013 and July 2018 it accounted for 12% of the value of all claims (over $1bn in value), making it the third most expensive cause of loss after ship sinking/collision and fire/ explosion.

Machinery damage claims have been increasing in severity, driven by the rising cost of repair and the consequence of larger ships. “Generally, there are growing concerns with the quality of maintenance and the adherence to manufacturers’ guidelines, as well as issues with the quality of components and spare parts. This is happening at a time when machinery damage losses are becoming more expensive, due to higher repair costs and the increased cost of spare parts,” said Justus Heinrich, Chief Underwriter Marine Hull, Central and Eastern Europe, AGCS

Volker Dierks, Head of Marine Underwriting, Central and Eastern Europe at AGCS, said that “as vessels get bigger, so do their engines. And when large engines fail they often cost more to repair. The size of ship determines where a vessel can be repaired as only a limited number of docks can handle large ships, if dry-docking becomes necessary, while lead times for specialist replacement parts can be six months or longer”.

For the 2019 Safety And Shipping Review, AGCS analyzed 26,022 shipping incidents between January 2009 and December 2018. Of these incidents more than a third (8,862) were caused by machinery damage or breakdown, such as engine failure – the most common cause of shipping incidents over the past decade – and over twice as many as the next highest causes of incidents, collision (3,648) and wrecked/ stranded (3,610).

The analysis showed that the number of machinery damage incidents had also increased by a third over the past decade. However, a growing number of engine manufacturers were now installing “Internet of Things” devices on engines in order to collect vital data in real time, said Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS, adding that “this is enabling them to issue timely recommendations to the vessels or a problem and to carry out maintenance, potentially avoiding breakdown.” alfst