Shipping Losses Drop to All-Time Low – Allianz Commercial

Shipping losses hit an all-time low in 2023, according to Allianz Commercial. Picture: Allianz Commercial
Despite ongoing geopolitical tension, economic strife and extreme weather events, shipping losses have hit an all-time low according to Allianz Commercial

With up to 90% of international trade transported across the world's oceans, maritime safety is critical to supply chain resilience.

But despite ongoing geopolitical tension, economic strife and extreme weather events, shipping losses have, astonishingly, hit an all-time low according to Allianz Commercial’s Safety and Shipping Review for 2024. 

The global shipping fleet lost just 26 large vessels last year, compared to around 200 vessels 30 years ago. This represents a decline of more than a third year-on-year and a 70% fall over the past decade.

However, the aforementioned risks mean the industry has its work cut out to maintain this impressive record. 

Captain Rahul Khanna, Global Head of Marine Risk Consulting at Allianz Commercial. Picture: Allianz

“The speed and extent of the way the industry’s risk profile is changing is unprecedented in modern times," says Captain Rahul Khanna, Global Head of Marine Risk Consulting, Allianz Commercial.

“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: decarbonisation.”

Southeast Asia suffers most shipping losses

During the latest 12-month period, a total of 26 shipping losses were reported compared to 41 in 2022. 

To further put this into context, a total of 729 losses were reported over the preceding decade.

The South China, Indochina, Indonesia and the Philippines maritime region stood out as a global loss hotspot, accounting for almost a third of the vessels lost in 2023 and 184 in the past 10 years. The East Mediterranean and Black Sea ranks second with activity up year-on-year.

Cargo ships accounted for more than 60% of vessels lost around the world in 2023, while foundered (sunk) was the main cause of losses, accounting for 50%. Extreme weather was reported as a factor in at least eight vessel losses, although the actual total is likely to be higher. 

General shipping incidents reported globally declined slightly last year to 2,951, with the British Isles experiencing the highest number (695) of any region. 

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Geopolitical conflicts make big impact 

The ongoing conflict in Gaza has demonstrated the increasing vulnerability of global shipping to proxy wars, disputes and geopolitical events, with more than 100 ships targeted in the Red Sea alone by Houthi militants as a result. 

Shipping in the region is likely to remain affected for the foreseeable future, with the re-emergence of Somali pirates an additional cause for concern.

“The war in Ukraine and Red Sea attacks have also revealed the increasing threat to commercial shipping posed by new technology such as drones, which are relatively cheap and easy to make and difficult to defend against without a large naval presence,” adds Rahul.

“Looking to the future, more technologically-driven attacks against shipping and ports are a distinct possibility. Reports of vessels experiencing GPS interference are increasing, particularly in the Strait of Hormuz, the Mediterranean and the Black Sea.”

Allianz Commercial's report goes on to highlight the impact of international sanctions on Russian oil and gas exports, particularly in the three years since Russia's invasion of Ukraine. These sanctions have contributed to the emergence of a 'shadow fleet' of tankers, estimated to number between 600 and 1,400 vessels.

“These are mostly older, poorly-maintained vessels that operate outside international regulation – often without proper insurance," adds Justus Heinrich, Global Product Leader, Marine Hull at Allianz Commercial. "This situation presents serious environmental and safety risks."

Justus Heinrich, Global Product Leader, Marine Hull at Allianz Commercial. Picture: Allianz

To date, these vessels have been involved in at least 50 incidents, including fires, engine failures, collisions, loss of steerage and oil spills.

Justus continues: "The financial burden of addressing these incidents frequently falls on governments or other vessel insurers if involved."

Green shipping challenges

The shipping industry accounts for approximately 3% of global human-caused emissions and is committed to meeting strict reduction targets.

Decarbonising requires a combination of strategies, including improved energy efficiency, alternative fuels, innovative ship design and new propulsion methods.

But is also presents numerous challenges as shipping attempts to adapt to new technologies while maintaining operations. Developing the infrastructure necessary to support alternative fuels, such as bunkering and maintenance facilities, will be essential alongside phasing out fossil fuels.

Safety concerns associated with handling alternative fuels that may be toxic or highly explosive are also worthy of attention. 

“Increasing shipyard capacity will be key as the demand for green ships accelerates," Justus concludes. "Such capacity is currently constrained with long waiting times and high building prices. More than 3,500 ships must be built or retrofitted annually until 2050, yet the number of shipyards was halved between 2007 and 2022.

"Constraints in shipyard capacity could lead to delays in repairs and maintenance, with damaged vessels or those experiencing machinery issues facing extended downtime."

Machinery damage or failure remains the most common cause of shipping incidents, accounting for more than half of the 1,587 incidents globally in 2023.

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