The shipping industry has to face old and new challenges. Rising geopolitical tensions, emissions rules and de-carbonization targets, mis-declared cargo and fire incidents continue to pose risk challenges. But the coronavirus crisis is a totally new situation. The crisis, difficult operating conditions and a sharp economic downturn could endanger the long-term safety improvements in the shipping industry for 2020.
“Coronavirus has struck at a difficult time for the maritime industry as it seeks to reduce its emissions, navigates issues such as climate change, political risks and piracy, and deals with ongoing problems such as fires on vessels,” says Baptiste Ossena, Global Product Leader Hull Insurance, AGCS. “Now the sector also faces the task of operating in a very different world, with the uncertain public health and economic implications of the pandemic.”
Here are some of the challenges:
- The inability to change crews is impacting the welfare of sailors, which could lead to an increase in human error on board vessels.
- Disruption of essential maintenance and servicing heightens the risk of machinery damage, which is already one of the major causes of insurance claims.
- Reduced or delayed statutory surveys and port inspections could lead to unsafe practices or defective equipment being undetected.
- Cargo damage and delay are likely as supply chains come under strain.
- The ability to respond quickly to an emergency could also be compromised with consequences for major incidents which are dependent on external support.
- The growing number of cruise ships and oil tankers in lay-up around the world pose significant financial exposures, due to the potential threat from extreme weather, piracy or political risks.
“Ship-owners also face additional cost pressures from a downturn in the economy and trade,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS. “We know from past downturns that crew and maintenance budgets are among the first areas that can be cut and this can impact the safe operations of vessels and machinery, potentially causing damage or breakdown, which in turn can lead to groundings or collisions. It is crucial that safety and maintenance standards are not impacted by any downturn.”
There are also some other challenges.
Events in the Gulf of Oman and the South China Sea show political rivalries are increasingly being played out on the high seas and shipping will continue to be drawn into geopolitical disputes. Heightened political risk and unrest globally has implications for shipping, such as the ability to secure crews and access ports safely. In addition, piracy remains a major threat with the Gulf of Guinea re-emerging as the global hotspot, Latin America seeing armed robbery increase and renewed activity in the Singapore Strait.
Ship-owners are also increasingly concerned about the prospect of cyber-conflicts. There has been a growing number of GPS spoofing attacks on ships, particularly in the Middle East and China, while there have been reports of a 400% increase in attempted cyber-attacks on the maritime sector since the coronavirus outbreak.
Targets to cut emissions will shape the shipping industry. The aim to halve CO2 emissions by 2050 will require the industry to radically change fuels, engine technology and even vessel design. Since January 1, 2020 allowable sulphur levels in marine fuel oil were slashed. However, compliance is not straightforward and teething problems could lead to a surge in machinery damage claims. Ultimately, de-carbonization will also have regulatory, operational and reputational implications. Progress on addressing climate change could stall with the focus on the coronavirus pandemic. This must not be allowed to happen.