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(Photo by Mahmoud Khaled / Getty Images)

By Captain Andrew Kinsey, Senior Marine Risk Consultant at Allianz Global & Corporate Specialty

When an Amazon parcel arrives, we hardly think about what it takes to get here. It is likely that your school supplies or item of clothing traveled a great distance across the ocean in the ship.

International shipping accounts for 90 percent of world trade, and the old adage “there are quite a few slip-ups between the cup and the lip” is appropriate. A lot can go wrong between origin and destination – and recently, marine insurers have been closely monitoring developments in our climate, economy and public health that could affect the chances of successful delivery.

Allianz’s annual safety and shipping report describes trends and developments in ship damage and safety and is a valuable resource for marine insurers. Here are some of the key highlights.

Losses at sea

Let us first consider the losses of ships at sea where the trend is stable. In 2020 there were 49 total losses of 100 gross tons or more, compared to 48 a year earlier. Name better safety measures, regulation, improved ship design and technology, and advances in risk management. However, the numbers hide a multitude of volatile factors such as extreme weather, machine breakdowns, fires and even piracy. Ship operators can improve fire detection and fire fighting on large ships and ensure that the machines have been inspected and are in good condition. In addition, weather effects can be mitigated through improved forecasts and ship routes.

Another major concern for insurers is shipping containers lost at sea. Last year, more than 1,000 went overboard in the first few months due to rough weather and heavy loads. Another factor is the increasing demand for consumer goods; In response, containers are stacked on board at unprecedented heights, raising concerns that they are not properly secured. In total, more than 3,000 containers were lost at sea in 2020, compared to a longer-term average of 1,382 per year.

Effects of the pandemic

Next comes the global pandemic, which so far has had little impact on marine insurance claims. It is entirely possible that the demands will increase as more ships come back into service and we see the effects of delayed maintenance. Another major problem is crews being restricted to their ships in ports due to public health requirements, delaying crew changes and medical treatment. Crew fatigue leads to human error – a major contributor to many casualties.

These are factors that justify immediate action by all parties in the supply chain, including cargo owners. One solution is to designate merchant seamen as vital workers so that they can receive vaccines and move around freely.

Bigger ships, bigger problems

The size plays a role in worldwide shipping. Do you remember the ship that was stuck in the Suez Canal for over three months? The Ever Given incident was a vivid example of how difficult it is to free large ships. When more equipment and more manpower is needed, someone has to pay. Not to mention the social and economic costs of disrupting the supply chain. There is a real possibility that we will see bare shelves and many “unavailable items” this holiday shopping season.

So if bigger ships cause bigger problems, why are there so many of them? It is all about economies of scale and fuel efficiency, and shipping lines really cannot be blamed for trying to comply with tightened environmental regulations and lowering their operating costs. However, large ships pose problems for the supply chain and often overwhelm ports with so many containers being dropped off at once.

Ship size is also directly related to the potential amount of damage, and this is a problem that keeps marine insurers up at night. Too often freight is misdeclared or incorrectly declared, which can lead to fires. If, for example, self-igniting charcoal, chemicals or batteries are not stowed properly, the risk of ignition increases dramatically. And if the item was declared incorrectly from the start, the crew doesn’t know what to do in an emergency.

To make matters worse, the skills for fire detection and fire fighting are inadequate on large ships. This is why the International Union of Marine Insurers (IUMI) is gathering stakeholders to set stricter standards.

At first glance, the risks associated with global shipping appear to be a moving target. However, closer examination reveals patterns and trends that, if carefully analyzed, can result in improved loss control, thereby reducing the “slip-ups” that can occur during transportation.

Captain Andrew Kinsey is Senior Marine Risk Consultant at Allianz Global & Corporate Specialty and Chairman of the Technical Services Committee of the American Institute of Marine Underwriters, which is a Triple-I Associate Member.