Safety and Shipping Review 2024: Maritime Losses Plunge to Record Lows Despite Increased Risks

Maritime security remains critical as oceans transport 90% of global trade goods. Thirty years ago, the global shipping fleet lost around 200 large vessels annually. But these figures have changed since then. In 2023, incidents fell to 26—a reduction of over a third compared to the previous year and 70% over the last decade, setting an all-time record. Despite this progress, to keep incidents at such low levels, the maritime sector faces increasing volatility and uncertainty due to wars, geopolitical events, climate change, and the trend towards larger vessels, according to the “Safety and Shipping Review 2024” by Allianz Commercial.

“The speed and extent to which the industry’s risk profile is changing is unprecedented in modern times. Conflicts like those in Gaza and Ukraine are reshaping global shipping, impacting crew and ship safety, supply chains, 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 the drought in the Panama Canal shows how climate change is affecting shipping, just as the industry faces its biggest challenge, decarbonization,” said Captain Rahul Khanna, Global Head of Risk Consulting at Allianz Commercial Maritime.

Southeast Asia Has Largest Reported Losses

In 2023, 26 total losses were reported globally, down from 41 in 2022. Over the past decade, 729 total losses were recorded, with the maritime region of South China, Indochina, Indonesia, and the Philippines accounting for 184. Last year, this region represented nearly a third of the lost vessels, with eight total losses.

The Eastern Mediterranean and the Black Sea followed with six vessels lost, showing increasing activity year-on-year.

Cargo ships accounted for more than 60% of vessels lost in 2023, with sinking being the leading cause, responsible for 50% of total losses. Extreme weather contributed to at least eight vessel losses worldwide last year, and the final tally is expected to be higher.

The number of reported maritime incidents decreased slightly last year, from 3,036 to 2,951, with the British Isles recording the highest number at 695.

Fires on board vessels, a constant safety concern, have decreased but remain significant. In 2023, there were 205 fires, the second-highest number in a decade, just behind 2022. Over the past five years, 55 fires resulted in total losses. Fires pose a key safety issue on larger vessels due to the potential threat to life, extensive damage, and high associated costs, which contribute to rising insurance costs for seafarers.

Geopolitical aftermath

Recent conflicts, such as those in Gaza, expose the increasing vulnerability of shipping to wars, disputes, and geopolitical events. Over 100 ships were targeted by Houthi militants in the Red Sea in response to the conflict, causing persistent disruptions in the region that are expected to linger.

The re-emergence of Somali pirates, marked by the first successful hijacking since 2017, is another growing concern.

“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 manufacture, and difficult to defend against without a large naval presence,” said Khanna. “Looking ahead, more technologically advanced attacks on ships and ports are also a distinct possibility. Reports of vessels experiencing GPS interference are increasing, particularly in the Strait of Hormuz, the Mediterranean, and the Black Sea.”

The report also notes that the tightening of international sanctions on Russian oil and gas exports since Russia invaded Ukraine has led to the growth of a substantial ‘shadow fleet’ of tankers, numbering between 600 and 1,400 vessels.

“These ships are mostly older, often poorly maintained, and operate outside international regulations, frequently lacking adequate insurance. This situation presents serious environmental and safety risks,” said Justus Heinrich, global product leader, Maritime Hull, at Allianz Commercial.

These vessels, often uninsured, have been involved in at least 50 incidents, including fires, engine failures, collisions, loss of steering control, and oil spills.

“The cost of dealing with these incidents often falls on governments or the insurers of other vessels involved,” said Justus Heinrich, Global Product Leader, Maritime Hull, at Allianz Commercial.

Latin America: Safe Routes and Climate Challenges

Since 2014, 41 vessels over 100 tons have disappeared in the Caribbean Sea and the South Atlantic, representing 5.6% of total industry losses. However, only one of the 26 ships lost last year was reported off South America’s east coast, reaffirming the region’s safety.

Notwithstanding, natural phenomena like El Niño have significantly impacted operations at the Panama Canal, severely affecting maritime traffic. The lack of rainfall and other weather conditions contributed to 2023 being the second driest year in the canal’s 110-year history. Consequently, low water levels halved maritime transits in February, costing carriers millions of dollars globally.

Recent announcements from Panama Canal authorities about increasing the number of daily transit windows from 24 to 32, effective June 1, have raised expectations for a recovery from the drought and a return to normal ship traffic sooner than anticipated.

Currently, about 5% of global maritime trade and 40% of U.S. container traffic passes through the Panama Canal.

“In addition to being generators of life, the seas are true ‘oceanic highways’ that transport around 80% of international trade, from food to all types of goods, through a complex network that feeds the global economy and which, of course, is not without risks. From the insurance industry, we are not only responsible for protecting companies’ capital and investments but also ensuring the continuity and efficiency of supply chains, which are crucial for the world economy,” said David Colmenares Spence, General Director for Latin America at Allianz Commercial.

Rerouting brings about new risks and environmental challenges

Conflicts in the Middle East have severely impacted Suez Canal transits, reducing them by over 40% by early 2024. These disruptions, combined with those in the Panama Canal, have strained global supply chains.

Rerouting vessels to alternative routes always pose significant challenges in terms of lead times and costs for customers. Vessels avoiding the Suez Canal add at least 3,000 nautical miles (over 5500 km) and ten days of sailing time by rerouting via the Cape of Good Hope, increasing costs and emissions.

The redirection of maritime routes due to geopolitical conflicts and environmental challenges is significantly impacting risk scenarios and the environment. Smaller vessels, accustomed to coastal waters, face heightened dangers from storms and rough seas. Moreover, the infrastructure required to handle incidents involving larger vessels, such as suitable ports of refuge or advanced salvage operations, is often lacking.

Environmental benefits are also at risk as redirected vessels tend to increase speed to cover longer distances, resulting in higher emissions. In fact, diversions in the Red Sea have been identified as a major factor contributing to the 14% increase in emissions in the European Union’s shipping sector this year.

Green transport challenges

Maritime transport contributes around 3% of global emissions from human activities but is committed to reducing these emissions through a mix of strategies, including energy efficiency improvements, alternative fuels, and innovative ship design.

Decarbonization poses significant challenges for the maritime industry as it navigates the integration of new technologies with traditional practices. Developing infrastructure to support vessels using alternative fuels is crucial. This includes establishing facilities for fueling and maintenance while gradually phasing out fossil fuels.

Safety concerns also arise with the handling of alternative fuels, which can be toxic or highly explosive. Terminal operators and vessel crews will need to adapt to these new safety protocols to mitigate risks associated with the transition to greener energy sources.

Increasing shipyard capacity is crucial to meet the accelerating demand for green ships, according to Justus Heinrich, Global Product Leader, Maritime Hull, at Allianz Commercial. “This capacity is currently limited, with long lead times and high construction prices,” Heinrich noted.

With projections indicating that over 3,500 ships will need to be built or refurbished annually by 2050, the number of shipyards has more than doubled from 2007 to 2022. However, capacity constraints persist.

“Capacity limitations at shipyards can cause ripple effects for repairs and maintenance,” Heinrich added. “Damaged vessels or machinery problems could face long delays.”

Machinery damage or failure remains the most frequent cause of maritime incidents, accounting for 1,587 incidents globally in 2023, representing more than half of all maritime incidents that year.

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