Maritime Losses Decline But Industry Faces Unprecedented Challenges, Allianz Report Warns

The global shipping industry has seen a significant reduction in the number of vessel losses, but faces increasing volatility from geopolitical events, climate change, and the trend towards larger vessels, according marine insurer Allianz Commercial.

The number of large vessels lost by the global shipping fleet fell to record low of 26 in 2023, representing a decline of over 70% over the past decade and more than a third year-on-year, as revealed in Allianz’s annual Safety and Shipping Review.

However, the industry faces growing volatility and uncertainties from war and geopolitical events, the impacts of climate change, and risks from the trend towards larger vessels. This means that maintaining this status quo may be challenging in the future.

Captain Rahul Khanna, Global Head of Marine Risk Consulting at Allianz Commercial, stressed the unprecedented speed and extent at which the industry’s risk profile is changing.

“Conflicts such as in Gaza and Ukraine are reshaping global shipping, impacting crew and vessel safety, supply chains and infrastructure, and even the environment. Piracy is on the rise, with a worrying re-emergence off the Horn of Africa. The ongoing disruption caused by drought in the Panama Canal shows how the changing climate is affecting shipping, all at a time when it is having to undertake its most significant challenge, decarbonization,” said Captain Khanna.

In 2023, global total losses in shipping decreased to 26 from 41 the previous year, with cargo ships accounting for over 60% of these losses. The main cause was sinking, accounting for 50% of losses, with extreme weather contributing to at least 8 losses. Although the number of shipping incidents and onboard fires declined, fires remain a significant safety concern due to their potential threat to life, extensive damage, and high associated costs, contributing to the long-term increase in large marine insurance claims.

The report also highlights that the South China, Indochina, Indonesia, and the Philippines maritime region accounted for almost a third of the vessels lost last year, making it the global loss hotspot.

Attacks on shipping in the Middle East have significantly impacted Suez Canal transits and global trade, exacerbating disruptions already caused by drought in the Panama Canal. This has led to lengthy diversions and increased costs for vessels. Allianz’s report notes that rerouting also affects the risk landscape and the environment, with smaller vessels facing challenging conditions, potential lack of support infrastructure for large vessels, and increased speeds leading to higher emissions.

Geopolitical conflicts and the consequential disruption to shipping are likely to continue. Increasing threats to commercial shipping posed by new technology, such as drones, are also a growing concern. The report reveals that incidents involving a ‘shadow fleet’ of tankers, which operate outside international regulation, have been increasing, contributing to serious environmental and safety risks.

Amid these challenges, the shipping industry is also grappling with the imperative of decarbonization. The shipping industry is committed to meeting stringent emission reduction targets. This demands a combination of strategies, including improving energy efficiency, adopting alternative fuels, and innovating ship design and propulsion methods.

The report warns that the industry needs to increase shipyard capacity to meet the demand for green ships. The number of shipyards more than halved between 2007 and 2022, and over 3,500 ships must be built or refitted annually until 2050. This constraint could lead to long delays for repairs and maintenance of damaged vessels or those with machinery issues, which were the most frequent cause of shipping incidents in 2023.

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