Allianz Analyzes Marine Risks – 100 Years after Titanic Disaster

Specialist marine insurer Allianz Global Corporate & Specialty (AGCS) has taken an in depth look at the current state of marine insurance 100 years after the sinking of the Titanic. That legendary disaster led to improved safety requirements for ocean going vessels, a trend that contiues to this day.

Now new challenges present the world’s merchant fleets with more risks, which AGCS says are being addressed. Despite the “trebling of the global fleet,” shipping losses have significantly decreased since the time of the Titanic.  But new risks are emerging, including ”increased ship sizes, ‘human error’ and arctic shipping,” which are now challenging shippers and marine insurers.

In the 100 years since the sinking of the Titanic, the world commercial shipping fleet has grown to “over 100,000 vessels;” however, as the report points out, “overall shipping loss rates have declined from one ship per 100 per year in 1912 to one ship per 670 per year in 2009.”

AGCS’s comprehensive report, “Safety and Shipping 1912-2012: From Titanic to Costa Concordia,” is based on research from Cardiff University’s Seafarers’ International Research Centre (SIRC). It highlights several key challenges for the industry “including the growing trend to ‘super size’ ships and cost pressures pushing ship owners to source crews from emerging economies where standards of training and assessment can be inconsistent.”

The research also identified “other significant safety risks.” These include “reduced crewing numbers which may compromise margins of safety and encourage ‘human error’ risks; increasing bureaucracy on board ships; the continued threat of piracy off Somalia and elsewhere; and the emergence of ice shipping and its associated navigational and environmental complications.”

Dr. Sven Gerhard, AGCS’s Global Product Leader Hull & Marine Liabilities, commented: “While the seas are safer than ever today, the industry needs to address these new risks proactively. For example, ultra-large ships pose challenges for insurers due to their sheer size and value, while others raise concerns on structural integrity and failure. While scale alone does not make these ships riskier, the increased sizes introduce specific risks that need to be addressed, such as salvage and recovery considerations and emergency handling.”

How large are the new container ships now under construction? The report notes that they “are so big that there is space below deck for a basketball court, a full-sized American football stadium, and a spectator-filled ice hockey arena.” As a result “ships of this size raise questions of adequate loss coverage in the event of an incident and of potential structural limitations.”

One constant, which certainly contributed greatly to the loss of the Titanic, remains the danger of “human error,” which ACGS points out is the “weakest link” and a continuing challenge in maritime operations. The report stressed that “despite a hundred years of technological and regulatory improvements in safety, over 75 percent of marine losses can be attributed to a wide range of ‘human error’ factors, including fatigue, inadequate risk management and competitive pressures, as well as potential deficiencies in training and crewing levels.”

Dr Gerhard explained: “As technological improvements reduce risk, so does the weakest link in the system – the human factor – become more important. This is where the industry should focus most closely, so that best practice risk management and a culture of safety becomes second nature across the world fleet.”

Past shipping disasters have notably led to safety improvements, such as the use of improved technologies. “RADAR or Global Positioning Systems have driven improved safety.” Examples of some of the past “major accidents” that have been the catalysts for key changes, include: ”the 1914 SOLAS convention,” which was triggered by the loss of theTitanic, and brought forth “regulations for ice navigation and life-saving equipment. TheHerald of Free Enterprise disaster in 1987 spurred the “adoption of the International Safety Management code, which the International Maritime Organization adopted in 1993 and which has done much to improve best safety practice.”

The latest high profile maritime disaster, the sinking of the Costa Concordia, “is certain to be no different, whatever the result of the official investigations into this cause will be,” Dr. Gerhard stated.

Some of the key facts & figures from AGCS’s research on safety and shipping from 1912-2012 include the following:
• Since 1910, world fleet tonnage has increased by a factor of 23 and now approaches one billion gross tons (2010).
• World seaborne trade has trebled since 1970 to over 8.4 billion tons of cargo loaded per annum.
• Cruise passenger numbers have shown significant growth in recent years, and are forecast to grow by 7.4 percent year on year from 1990-2015. It is estimated that in 2015, over 22 million passengers will be carried on cruise vessels worldwide (2011: 19.2 million).
• Marine transport is one of the safest means of passenger transport overall with far lower fatal accident rates than car, motorcycle, bicycle or walking in Europe.
• Professional seafarer fatality rates have fallen in many countries: for example, in the UK, in 1919 it was estimated that there would be 358 fatal accidents for every 100,000 seafarer years spent ‘at risk’ – a rate which had fallen to 11 by the period 1996-2005. However, this fatality rate is still twelve times higher than in the general workforce.
• Accident ‘black spots’ include South China, Indo-China, Indonesia and Philippines with 17 percent of total losses in 2001-2011, followed by East Mediterranean and Black Sea (13 percent), and Japan, Korea and North China (12 percent). The seas around the British Isles also show relatively high loss concentrations (8 percent).
• Technical innovations over the last 100 years include improved construction techniques, echo-sounding, RADAR, Very High Frequency radios, Automatic Radar Plotting Aid, satellite communications, GPS positioning finding, and Electronic Chart Display and Information Systems – all of which have supported marine safety.

Source: Allianz Global Corporate & Specialty (AGCS)