How the shipping boom, war, and COVID impact safety at sea
The Covid-19 pandemic, combined with the war in Ukraine and a shipping boom, has made safety a critical issue. That is why freight forwarder like ShipLilly are highly recommending their clients to insure their cargo. The incidents are quite troubling so far, including a ship catching fire and sinking in the Atlantic. The losses from the cargo that included Lamborghinis, Bentleys, and Porsches are incalculable. Without adequate cargo insurance, such an incident would destroy businesses and brands.
Then there are stories of a container vessel sinking in Sri Lanka following an ignition. The Even Given accident in the Suez Canal opened the gates. An Evergreen ship faces severe issues in the Chesapeake Bay. Containers carrying valuables vanish into the Pacific with little warning. When ships were stuck queueing in Southern California, a storm did some damage, including some allegedly affecting an oil pipeline.
The high seas are becoming a dangerous space
Anyone not insured runs the risk of losing it all. On the 16th of February 2022, Felicity Ace, which is a car carrier, caught fire and sank on the 1st of March 2022. Right from the onset of the Covid-19 pandemic, the signs were there. Hundreds of thousands of people traveling by sea were trapped as lockdowns were suggested or implemented. A supply chain crisis then followed, and shipping volumes spiked considerably. The oldest vessels had to come out to cover the gaps and some of them may not have met the highest safety standards, but they had to do so in the circumstances.
To make matters worse, Russia invaded Ukraine and war was declared. Allianz is one of the largest insurers in this sector and its latest annual review of casualties is troubling. Capt. Rahul Khanna who is the head of marine risk consulting put the events and statistics in context. Whereas the casualties have not gone up that much, there are plenty of collisions, groundings, fires, explosions, and vessels sinking. The shipping industry has tried to maintain the highest safety standards possible. However, accidents do happen, and cargo insurance is necessary for professional shippers.
Preparing for accidents and similar incidents
In these circumstances, cargo insurance becomes necessary. The larger ship sizes mean the monetary claims are going higher and higher. Last year, at least 54 ships were declared total losses. Although that is 17% lower than the previous year, the losses remain an issue. Some of the key issues that lead to accidents, according to Lloyd’s List Intelligence, include sinking, which accounts for 59% of cases. This is then followed by fire, which accounts for 15%. Machinery failure is also a grave issue, accounting for 11% of incidents. Shiplilly can provide further information on coverage issues.
Although we are not yet in the days of the Exxon Valdez spill in Alaska, prudent shippers and anyone in the business must make arrangements to ensure that, at the very least, their cargo is covered. There is a trend toward few overall losses. However, that does not mean that the value of those losses is less damaging to the person or business entity that suffers them. If anything, the current rising cost of living means that everyone must tighten their budgets. Large losses are shaking the market, and claims costs will continue to pose challenges.
The statistics show important losses and risks that must be addressed
The year 2021 reported 3000 maritime incidents. This is an increase of 10% when compared to 2020. Machine failure was particularly challenging during that year and accounted for 44% of the occurrences. Although some experts have not yet turned this increase into a trend, early preparation and contingency planning are essential. The lockdown may also have created year-to-year fluctuations that could possibly settle down in 2023. However, there is no guarantee.
A combination of factors increases and maintains risk including war, supply chain blockages, overcrowding, use of older ships, and general safety challenges on sea. If the current incident levels continue to rise, the safety wins made over the last few decades could be reversed. The important thing is to watch the market and have cargo insurance for any adverse outcomes. Certainly, many experts are not underestimating the magnitude and potential impact of the global supply chain crisis.
The race to import is expanding figures and demand
Container ships are nearly maxed out because they must satisfy the demand for online shopping and a general uptick in consumer spending. There are many more and bigger boxes on board which increases the risk of tipping over. In fact, there are other risks, such as improperly storing or loading hazardous materials, multiplying the risk for all the other goods in transit. That is possibly why we are seeing many fires on board. Some shipping companies are increasing fines for improper declarations of hazardous goods. For example, Mediterranean Shipping Company (MSC) now charges $15000 per container since the 18th of May 2022. A few near misses are clarifying minds about this.
This is not an isolated concern. Just last year in October, Zim Kingston, a container ship, lost 109 boxes overboard before catching fire. The pressure to deliver everything on time is causing some shipping companies to take risks. Decks are stacked to the limit as they traverse through the high seas. Apart from the legal consequences of an accident, the financial burden can be prohibitive without adequate cargo insurance. When ONE Apus lost 1,816 containers overboard in an incident that occurred in November 2020, the losses came to $200 million. More recently, the Maersk Essen lost 750 boxes overboard in January 2021.
There is no good news for those that are not well insured. As a case in point, the Maersk Eindhoven lost 260 boxes in February, with another 65 damaged. Maersk’s Dyros indicated that 90 boxes were lost overboard in March 2022. Moreover, another 100 containers were damaged. It is estimated that between 2017 and 2019, an average of 779 containers fell overboard per year across the globe. Recent losses exceed that average. It seems that this is a business that is inundated with risk.
As the supply chain becomes clogged and demand increases, there is bound to be an uptick in risk. Many shipping companies are trying to meet consumer deadlines even as they grapple with the wide-reaching consequences of the Russia-Ukraine conflict. In maxing out capacity, the risk of hazards and accidents increases exponentially. The only viable solution now is prevention through cargo insurance. Shiplilly can help you explore your options in time before you come up empty after one of the many accidents that are taking place. Contact us today to discuss your cargo insurance needs.