Allianz Commercial assesses the annual performance of the shipping sector

According to the Allianz Commercial Safety and Shipping Review 2024, increasing volatility and uncertainty related to war, geopolitical events, climate change and the trend towards larger ships create challenges to maintaining the status quo in shipping.

Given that as much as 90% of international trade is transported across oceans, maritime safety is crucial. Thirty years ago, the world’s shipping fleet lost about 200 large ships a year. That number fell to a record low of 26 in 2023, down more than a third year-on-year and 70% over the past decade.

“The speed and scope of change in the industry’s risk profile is unprecedented in modern times. Conflicts like those in Gaza and Ukraine are reshaping global shipping, impacting the safety of crews and ships, supply chains and infrastructure, and even the environment,” said Allianz Commercial global head of maritime risk consulting, Captain Rahul Khanna.

“Piracy is increasing as it re-emerges near the Horn of Africa. “The ongoing drought disruptions in the Panama Canal demonstrate how a changing climate is impacting shipping at a time when it must address the critical challenge of decarbonization,” Khanna said.

Reducing transport losses compared to 2022

There were 26 total losses worldwide in 2023, compared to 41 the year before. In total, there have been over 700 losses (729) over the last decade. Southern China, Indochina, Indonesia, and the Philippine Maritime Region are the main sites of global losses, both over the past year and decade (184). It accounted for almost a third of the ships lost last year (8).

The Eastern Mediterranean Sea and the Black Sea are in second place (6), with increased activity year on year. Cargo ships accounted for over 60% of ships lost worldwide in 2023. Sinking (sinking) was the leading cause of all total losses, accounting for 50%. Extreme weather contributed to at least eight ship losses in 2023, with the final total likely to be higher.

The number of reported shipping incidents around the world fell slightly last year (2,951 compared to 3,036), with the British Isles reporting the highest number (695). The number of fires on ships, a perennial problem, has also decreased.

However, there have been a total of 55 losses over the past five years, and over 200 fire incidents (205) were reported in 2023 alone, the second highest number of losses in the decade after 2022. Fires remain a key safety issue on larger ships due to the potential risk to life, the scale of damage and the associated severe costs, contributing to the long-term increase in the cost of large marine insurance claims.

Recent incidents such as those following the Gaza conflict have highlighted the increasing vulnerability of global shipping to proxy wars, disputes and geopolitical events, with Houthi militants attacking more than 100 ships in the Red Sea in response to the conflict.

Shipping disruptions in and around the region persist and are likely to continue. Another cause for concern is the re-emergence of Somali pirates after their first successful kidnapping since 2017.

Khanna notes that both the war in Ukraine and the attacks in the Red Sea have revealed the growing threat to commercial shipping posed by new technologies such as drones, which are relatively cheap, easy to produce and difficult to defend without a large naval presence .

“Looking ahead, more technological attacks on shipping and ports are also a distinct possibility. There are increasing reports of ships experiencing GPS interference, particularly in the Strait of Hormuz, the Mediterranean Sea and the Black Sea,” Khanna said.

The report also noted that in the three years since Russia’s invasion of Ukraine, the gradual tightening of international sanctions on Russian oil and gas exports has contributed to the growth of a significant “shadow fleet” of tankers, numbering between 600 and 1,400 vessels. These are mostly older, often poorly maintained ships that operate outside of international regulations, often without adequate insurance.

Changing the route, environmental challenges

Attacks on ships in Middle Eastern waters have severely impacted transit through the Suez Canal, which has dropped by more than 40% in early 2024, impacting trade. These disruptions come shortly after ongoing drought problems in the Panama Canal, which constitute a double strike for shipping and cause more problems in global supply chains.

Vessels using alternative routes face lengthy diversions and increased costs, impacting their customers. Bypassing the Suez Canal adds at least 3,000 nautical miles (over 5,500 km) and 10 days of sailing if rerouting through the Cape of Good Hope.

Changing the route also impacts the hazard landscape and the environment. Storms and rough seas may pose a greater challenge to smaller ships accustomed to navigating coastal waters, while infrastructure to handle incidents involving larger ships, such as adequate ports of refuge or advanced rescue operations, may not be available.

Environmental benefits may be lost as rerouted ships increase speed to cover longer distances. Red Sea diversions are cited as the main factor contributing to a 14% increase in emissions in the EU shipping sector this year.

Green shipping

Shipping is responsible for around 3% of global human-made emissions, and the industry is setting tough targets to reduce them. Achieving these goals will require a combination of strategies, including energy efficiency measures, the adoption of alternative fuels, innovative ship design and new propulsion methods.

Decarbonization creates challenges for the industry combining new technologies with existing ways of working. For example, the industry must develop infrastructure to support ships using alternative fuels, such as through bunkering and maintenance, while phasing out fossil fuels. There are also potential safety concerns for terminal operators and ship crews handling alternative fuels, which may be toxic or highly explosive.

Allianz Commercial notes that as demand for green ships increases, increasing shipyard efficiency will be key. This capacity is currently limited due to long waiting times and high building prices. More than 3,500 ships will need to be built or modernized every year by 2050, and yet the number of shipyards will be reduced by more than half between 2007 and 2022.

Shipyard capacity constraints could have a knock-on effect on repairs and maintenance, with damaged ships or ships with technical problems potentially facing long delays. Machinery damage or breakdowns are the most common cause of transport accidents, accounting for more than half of them worldwide in 2023 (1,587).

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