Shadow fleets, fire risks among the biggest concerns for shipping industry: AGCS

By Alex Zank, Advisen

Shadow tanker fleets transporting Russian oil and an uptick in losses from highly flammable cargo are among the most significant risks facing the shipping industry today, according to Allianz Global Corporate & Specialty’s (AGCS) Safety & Shipping Review 2023 report.

The number of vessels deemed total losses dropped to 38 in 2022, down by more than a third from the previous year and reaching the lowest number AGCS has seen in the 12-year history of its shipping review. By comparison, 200-plus vessels were lost annually 30 years ago around the world.

Even so, several clouds are on the horizon, according to Captain Rahul Khanna, global head of marine risk consulting at AGCS.

“More than a year after Russia’s invasion of Ukraine, the growth of the shadow oil tanker fleet is the latest consequence to challenge shipowners, their crew and insurers,” Khanna said in a statement. “Fire safety and the problem of mis-declaration of hazardous cargo must be fixed if the industry is to benefit from the efficiency of ever- larger vessels. Inflation is pushing up the cost of hull, machinery, and cargo claims. Meanwhile, although the industry’s decarbonization efforts are progressing, this remains by far the sector’s biggest challenge.”

Ten of the 38 vessels lost in 2022 were cargo ships, along with six fishing vessels and five passenger ships. More than half of lost vessels foundered (sunk or submerged), making it the main cause of total loss. Fire/explosion ranked as the second-most common cause of loss, followed by vessel collision. Extreme weather contributed to at least eight of the total losses in 2022.

While total vessel losses declined last year, the number of shipping casualties or incidents reported stayed level. Machinery damage or failure accounted for nearly half of all 3,032 incidents reported globally. More than 200 fires were reported last year, the highest in a decade.

New cargo such as EVs and battery-powered goods, which are growing in popularity as nations seek to reduce their carbon footprint, increase the risk of fire on ships. Lithium-ion batteries, which are highly flammable and hard to extinguish, are a growing fire risk for container shipping and car carriers, noted AGCS. The lithium-ion battery market is expected to grow by over 30% annually over the next decade.

“Most ships lack the suitable protection, detection, and firefighting capabilities to tackle such fires at sea,” Khanna said. “Attention must focus both on pre-emptive measures and emergency plans to help mitigate this peril such as adequate crew training and access to appropriate firefighting equipment or improving early detection systems. Purpose-built vessels for transporting EVs would be advantageous.”

To circumvent international oil sanctions, Russia and its allies have created a shadow tanker fleet to transport and sell the country’s oil. Estimates of the fleet vary, reaching up to 600 vessels. The shadow fleet is more likely to consist of older ships with lower maintenance standards, according to Justus Heinrich, global product leader of marine hull at AGCS. A recent New York Times investigation shows how the shadow tankers disguise their whereabouts in order to skirt sanctions and obtain insurance.

“The increase in their number is a worrying development, threatening the world fleet and the environment,” Heinrich said in a statement. “A major incident can cause loss of life as well as uninsured damage or pollution.”

Reporter Alex Zank can be reached at alex.zank@zywave.com