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Marine Losses Continue Downward Trend

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The marine industry continued to see a steady decline in the number of large ships losses globally since 2002, with 94 ships lost in 2013, down 20% from 117 reported in 2012, according to a study by Allianz.

The “Safety and Shipping Review 2014” by Allianz Global Corporate & Specialty found that of ships lost, the largest number, 32, were cargo vessels; 14 were fishing vessels; and 12 were bulk shipments. Only six passenger ships were lost, the survey found. The most common cause of losses in 2013, and over  the last 12 years, was foundering (sinking or submerging). The demise of 69 ships accounted for nearly three-quarters of all losses—with bad weather a significant driver.

Worldwide there were 1,673 losses from Jan. 1, 2002-Dec. 31, 2013, with an average of 139 per year. The top geographic area for losses has been South China, Indo China, Indonesia and Philippines. The area including British Isles, North Sea, English Channel and Bay of Biscay is still ranked fourth, despite improvement. With 45 losses overall, the U.S. eastern seaboard improved in 2013, dropping out of the top 10 regions.

According to the study, January is the worst month for all casualties in the Northern Hemisphere. There were 23% more losses in January compared with the quietest month, June. In the Southern Hemisphere July sees 41% more losses than April.

The majority of losses are caused by machinery damage, the reason for most losses in marine insurance. Statistics from the International Union of Marine Insurance (IUMI) report that 40% of hull claims are machinery damage and account for 20% of costs.

The review found that while piracy is still a threat, it has also subsided. Piracy at sea reached its lowest levels in six years, with 264 attacks recorded worldwide in 2013, a 40% drop since Somali piracy peaked in 2011. Fifteen incidents were reported off Somalia in 2013, including Gulf of Aden and Red Sea incidents, down from 75 in 2012, and 237 in 2011 (including attacks attributed to Somali pirates in Gulf of Aden, Red Sea and Oman).

According to the study: “The very real threat of piracy for ships operating in the Gulf of Aden reached the general public last year as the Hollywood Oscar-nominated blockbuster Captain Phillips was released. Tom Hanks played the lead as the master of the pirated Mærsk Alabama, broadcasting the piracy problem to a much wider audience and raising awareness of its consequences. The steps that the international maritime community has taken to reduce the threat of piracy in the Gulf of Aden have been extremely successful with the number of ships seized and hostages taken in 2013 significantly down on 2012.”

Lower losses overall were attributed to a number of factors including increased regulation, which has helped the maritime industry improve its safety record. Because the quality of operations varies in different regions, however, there is a big need for universal regulations on ship safety to reduce the risk of casualties and loss of life, the survey concluded.

 

Are Drone Cargo Ships the Next Step in Supply Chain Automation?

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Rolls Royce Drone Ships

Ahoy, robots!

The $375 billion shipping industry, which carries 90% of world trade, is next in line for drones to take over—at least, that’s what Rolls-Royce Holdings is betting on. The London-based engine manufacturer’s Blue Ocean development team has already set up a virtual-reality prototype in its Norwegian office that simulates 360-degree views from a vessel’s bridge.

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The company hopes these advanced camera systems will eventually allow captains in control centers on land to direct crewless ships. The E.U. is funding a $4.8 million study on the technology, and researchers are preparing a prototype for simulated sea trials next year.

“A growing number of vessels are already equipped with cameras that can see at night and through fog and snow—better than the human eye, and more ships are fitted with systems to transmit large volumes of data,” said one Rolls-Royce spokesperson. “Given that the technology is in place, is now the time to move some operations ashore? Is it better to have a crew of 20 sailing in a gale in the North Sea, or say five people in a control room on shore?”

Crew costs of $3,299 a day account for about 44% of total operating expenses for a large container ship, industry accountant and consultant Moore Stephens LLP told Bloomberg News. By loading more cargo and replacing the bridge and other systems that support the crew, such as electricity, air conditioning, water and sewage, ships can cut costs and boost revenue, claims Oskar Levander, Rolls-Royce’s vice president of innovation in marine engineering and technology. The ships would be 5% lighter before loading cargo and would burn 12% to 15% less fuel, he reported.

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Unmanned ships would require captains to operate them remotely and people to repair and unload them in port, but the lack of crew at sea could change the landscape of piracy. Without people to take hostage, the risks would greatly reduce—as would the need for for kidnap and ransom insurance premiums. The material being transported, however, could be even more vulnerable without a human line of defense.

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Further, the remote operating system opens the door to digital hijacking from hackers or cybercriminals.

Currently, human error—most notably tied to fatigue—causes most maritime accidents, according to Allianz. But, as the 600,000-member International Transport Workers’ Federation is quick to point out, humans are also the first line of defense in a field plagued by unpredictable conditions. “The human element is one of the first lines of defense in the event of machinery failure and the kind of unexpected and sudden changes of conditions in which the world’s seas specialize,” Dave Heindel, chairman of the ITF’s seafarers’ section, told Bloomberg Businessweek.

Drone cargo ships would represent the latest part of a rapidly automating supply chain. As Wired pointed out, as customers’ desire for ever-more-instant gratification mounts and companies like Amazon find ways to drastically cut shipping costs with technology, consumer pressure may make this too tempting a development to pass up.

Can Britney Spears Ward Off Piracy?

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Britney Spears

Pirates remain a notable risk for businesses that involve maritime activities like shipping for supply or distribution. While it’s easy to dismiss the idea with images of wooden ships, gangplanks and a thoroughly unwashed Johnny Depp, the face of piracy has changed, but it has far from disappeared.

In the last decade, increased pirate activity out of war-torn Somalia have drawn considerable media attention, especially as hundreds of ships were attacked and dozens hijacked and their crews held hostage. Pirates earned an average of $4.87 million per ship in 2011, a huge financial toll for businesses that was only compounded by rising need for kidnap and random insurance for crews.

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Yet the Horn of Africa and the Suez Canal are not the most perilous seas. Australia’s News Limited reported, “Shipping industry figures show that the waters around Indonesia and the Malay Peninsula is the world’s hotspot for pirates.

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” The International Maritime Bureau found that Indonesia has experienced a more than 50% surge in pirate attacks in the first half of 2013. Of the 48 attacks reported, 43 involved pirates boarding vessels and assaulting the crew. West Africa has also grown as a hotspot, and the Control Risks RiskMap Maritime 2013 also highlighted high conflict potential at sea off South Korea, Nigeria, and Bangladesh.

RiskMap Maritime 2013Some experts are turning to more creative measures to ward off pirates, Time magazine reported this week. To deter pirates from approaching supertankers off the east coast of Africa, merchant navy officer Rachel Owens said ships have begun blasting the musical stylings of Britney Spears.

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“Her songs were chosen by the security team because they thought the pirates would hate them most,” Owens said. “These guys can’t stand Western culture or music, making Britney’s hits perfect.”

It’s a colorful approach to consider, especially as Hollywood turns a spotlight on mismanaged pirate attacks with the new Tom Hanks movie “Captain Phillips.” Let’s just not take it too far – as Steven Jones, of the Security Association for the Maritime Industry, told Time, “I’d imagine using Justin Bieber would be against the Geneva Convention.”

Somali Pirates: Attacks Down but Reach Spreads

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We’ve covered the pirate crisis in the Gulf of Aden numerous times — once in the February 2009 issue of Risk Management and twice more on this blog (The Rising Price of Piracy Insurance and Security at Sea).

Though the International Maritime Bureau (IMB) states that sea attacks worldwide fell by more than a third in the first quarter of this year, the attacks continue. Pirates are now increasing their area of surveilance and capture (it now includes the massive Indian Ocean) and though U.S. and foreign warships have been canvassing the area, the pirates have not backed down. In fact, their army and area of operation has seemed to grow.

This week alone, three Thai fishing vessels were seized in hijackings 1,200 miles east of Somalia in the Indian Ocean — the farthest from the Somali coast pirates have ever attacked, according to the EU Naval Force. A total off 77 crew were taken hostage.

And just yesterday, in the fourth attack in less than a week, pirates seized a bulk carrier — the Liberian-owned Voc Daisy — in the Gulf of Aden. The ship was heading from the UAE towards to the Suez Canal when it, along with its crew of 21, were taken hostage.

After a successful pirate hijacking, the shipping company that owns the vessel will, in most cases, immediately issue a ransom for the return of the ship and crew. But that may become a bit tougher for American ships should they fall victim to a pirate attack.

The shipping industry has long seen ransom payments to retrieve hijacked vessels, cargos and crews as a cost of doing business. But after Obama last week issued an executive order on Somalia, shipping officials say it’s no longer clear whether companies with U.S. interests can legally pay ransoms. The industry is worried because ransoms have been the only way to quickly and safely free hostages.

The order states it is illegal for anyone to supply financing to any Somalis involved in military activities. Contrary to that, the U.S. Treasury Department said it is not interested in prosecuting anyone trying to free hostages. This understandably puts shipping companies in a tough place.

“Taking away our ability to secure the safe release of our crew members and vessels could put us as an employer and ship owner in a very difficult position,” Moller said. “Thankfully we have not had to test such a scenario under these restrictions and it’s difficult for us to comment further on the consequences of the order without speculating.”

The IMB states that currently, pirates hold 14 vessels and 305 hostages.

Picture 2

The IMB live piracy map illustrates where pirate attacks have occurred so far this year.