Post-pandemic world brings new risks to maritime industry

While the Covid-19 pandemic resulted in few direct claims for the marine insurance sector, the subsequent impact on crew welfare and the boom in shipping and port congestion raises potential safety concerns, according to marine insurer Allianz Global Corporate & Specialty SE’s (AGCS) Safety & Shipping Review 2022. 

Demand for crew is high, yet many skilled and experienced seafarers are leaving the industry. A serious shortfall of officers is predicted within five years.

For those who remain, morale is low as commercial pressures, compliance duties and workloads are running high. Such a work situation is prone to mistakes – 75% of shipping incidents involve human error, AGCS analysis shows.

The economic rebound from Covid-19 lockdowns has created a boom time for shipping, with record increases in charter and freight rates. While this is a positive for shipping companies, higher freight rates and a shortage of container ship capacity are tempting some operators to use bulk carriers, or consider converting tankers, to transport containers. 

The use of non-container vessels to carry containers raises questions around stability, firefighting capabilities, and securing cargo. Bulk carriers are not designed to carry containers, which could impact their maneuvering characteristics in bad weather, and crew may not be able to respond appropriately in an incident.

With demand for shipping high, some owners are also extending the working life of vessels. Even before the pandemic, the average age of vessels was rising. Although there are many well-managed and maintained fleets composed of older vessels, analysis has shown older container and cargo vessels (15 to 25 years old) are more likely to result in claims, as they suffer from corrosion, while systems and machinery are more prone to breakdown. The average age of a vessel involved in a total loss over the past 10 years is 28.

Shipping bottlenecks and port congestion

Covid-19 measures in China, a surge in consumer demand, and the Ukraine invasion have all been factors in ongoing unprecedented port congestion which puts crews, port handlers and facilities under additional pressure.

“Loading and unloading vessels is a particularly risky operation, where small mistakes can have big consequences. Busy container ports have little space, while the experienced labor required to handle the containers properly is in short supply. Add in fast turnaround times and this may result in a heightened risk environment,” explains Justus Heinrich, Global Product Leader, Marine Hull, at AGCS. 

Climate change: transition problems

With momentum gathering behind international efforts to tackle climate change, the shipping industry is coming under increasing pressure to accelerate its sustainability efforts, the report notes, given its greenhouse gas emissions grew by around 10% between 2012 and 2018.

Decarbonization will require big investments in green technology and alternative fuels. A growing number of vessels are already switching to liquefied natural gas (LNG), while other alternative fuels are under development, including ammonia, hydrogen and methanol, as well as electric-powered ships. 

The transition to alternative fuels will likely bring heightened risk of machinery breakdown claims, among other risks, as new technology beds down and as crews adapt to new procedures.

Photo credit: iStock/ nightman1965

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