GT Marine on navigating perils in shipping

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Robust insurance solutions are essential as Australia’s shipping industry faces rising risks from geopolitical tensions, piracy and more

THE SHIPPING industry is the silent partner behind the prosperity of Australia’s international trade, and its continued smooth operation is crucial. A recent paper, “The Safety and Shipping Review 2024” by Allianz Commercial’s Global Marine team, shows that as much as 90% of international trade is dependent on the shipping industry, underscoring just how important it is that the sector remains robust and profitable. But the risk of shipping and cargo losses continues

GT Insurance is an award-winning specialist underwriting agency that has been catering to the needs of fleet and heavy vehicle operators for over 25 years. Fully backed by Allianz Australia Insurance, the company merged with AM&T in early 2023, creating an even more diverse underwriting agency with specialised coverage across the motor and machinery, marine and transit sectors. GT retains a strong local presence in metro and regional markets throughout Australia. This allows the agency to move quickly for its brokers and their customers at times when they need it most. Its relationship-driven approach consistently earns GT recognition for its strength of relationships, quality of solutions, and claims and customer service excellence.

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Piracy resurging

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“We’re seeing times of significant global unrest, and with that comes heightened risk for shipping channels”

Steve Amey, GT Marine

alongside increased trade volumes and unstable geopolitics, impacting the safety of ships, cargo and, most importantly, seafarers.

According to the review, shipping has long been a target of groups involved in international conflicts who are aiming to raise their profiles. The situations in Ukraine and Gaza have the potential to reshape global shipping patterns, with possible impacts on vessel safety, supply chains, infrastructure and the environment. “Cargo ships from a number of countries have been subjected to drone and missile attacks during their passage through the Red Sea,” says Tyrone Avellano, head of underwriting at GT Marine. “One of the latest attacks was on the Rubymar, which sank off Yemen in March of this year.”

Another attack in June that sank a 2022-built vessel underscores that the danger is broad-based. The cost of covering vessels for transit of the area – measured as a percentage of the ship’s value – surged to about 0.6% after the incident from between 0.3% and 0.4% previously. This equates to a vessel worth US$50 million having to pay US$300,000 for one passage. More than 100 ships are estimated to have been targeted in the Houthi campaign so far, mainly in the Bab-el-Mandeb region that serves as the southern gateway to the Suez Canal. The ongoing potential for Houthi militants to choke the global economy is likely to be prolonged as the group have stated that they will not stop this activity until Israel ceases its war on Hamas.

“In addition to fires in containers, we’re now seeing the increased potential fire risk posed by the transportation of lithium-ion batteries as a major consideration”

Tyrone Avellano, GT Marine

Against this backdrop, one of the biggest threats to the shipping industry is the greater difficulty of attracting and retaining seafarers due to the potential risks to their physical condition and general wellbeing. Crew members regularly endure episodes of duress, and this was particularly acute during the COVID pandemic when crews were separated from their families for extended periods and forced to remain on vessels for months. Another example is the crew of the vessel Dali, which hit the Francis Scott Key bridge in the US city of Baltimore in March. The crew were held on board as ‘witnesses’ for the 12-week period between the incident and when the Dali was cleared to leave. Maritime research and consulting firm Drewry reported in June that the seafarer labour shortage had reached a 17-year high and would likely have lasting impacts on the industry. The report suggested that the shortfall in officers had nearly doubled to almost 10% of the global pool. COVID has also disrupted the training pipeline for new crew,

and manning vessels will be challenging for the next few years, with a personnel deficit projected to continue until at least 2028.

Tug boat Draging cargo container ship to dry dock concept maintenance service working in the sea

Houthi militants and a resurgence in piracy

The human cost

Published 12 Aug 2024

Number of piracy incidents against ships

2022

2023

120

2022

2023

Number of crew taken hostage

Source: Allianz Commercial Safety and Shipping Review 2024

Source: International Union of Marine Insurance (IUMI) major claims database

Fire/explosion

Global major cargo losses by type of loss, 2022

NatCat or natural perils

Denting/breakage/ latent defect

Theft/robbery

Wetting/mould/humidity/water damage

Sabotage/strike

Contamination

Road accident

Transport accident during loading/unloading

Other

30%

15%

18%

Statistics from the Allianz review confirm the global loss in vessels over 100 gross tonnage fell from 89 in 2014 to 41 in 2022 and 26 in 2023 – less than a third of the number seen a decade ago. While the reduction in losses suggests a significant improvement in maritime safety, the speed and extent of changes in the industry and the geopolitical landscape are contributing to an environment in which the scale and scope of the risks to international shipping are increasing. “We’re seeing times of significant global unrest, and with that comes heightened risk for shipping channels,” says Steve Amey, head of distribution at GT Marine. “It’s essential that we and our customers stay informed and prepared to mitigate the risk of potential issues and losses.”

A closer look behind apparently benign loss data

The review also shows that piracy is back in vogue alongside the security concerns in the Red Sea. The past year has seen maritime piracy rise to 120 reported incidents against ships globally in 2023, up from 115 in 2022. Of these, 105 vessels were boarded and four hijacked, according to the ICC International Maritime Bureau. Worryingly, the number of crew taken hostage increased from 41 to 73, while the number kidnapped rose from two to 14. A big concern is the re-emergence of piracy off the Horn of Africa, with a number of vessels having been attacked.

Despite the international tensions and resurgence of piracy, Avellano says one of the major causes of loss for large vessels, and the root cause of many General Average losses, is fire. There appear to be several reasons for the heightened risk in this area. The growing size of container vessels increases the probability of containers carrying cargo that may ignite, particularly if this is coupled with misdeclaration of cargo or more frequent transportation of potentially dangerous goods. “In addition to fires in containers, we’re now seeing the increased potential fire risk posed by the transportation of lithium-ion batteries as a major consideration,” says Avellano. These batteries not only increase the likelihood of fires in containers when they are transported with consumer goods but can also cause extensive damage to ‘Ro-Ro’ (roll-on, roll-off) vessels such as car carriers and ferries transporting electric vehicles. Insurers continue to highlight the additional risks, and some car-carrier operators are cautious about transporting EVs.

Increasing fire threat

Added to these issues, climate change and new weather events are also impacting the risk environment for insurers. Insurers are more frequently managing new types of risk, such as cyber, and having to deal with the accumulation of risk as cargo of growing value is being stored in single-port facilities or transported on vessels that continue to grow in capacity. The environment is not one for the faint-hearted, and it’s increasingly important to work with professional marine insurers who understand the volatile changes the market is

Other issues and implications for insurance

experiencing. Against this uncertain landscape, insurers such as GT Marine are stepping up their underwriting game. The future of Australia's shipping industry hinges on its ability to adapt and respond to an increasingly complex risk landscape. With trade volumes rising and geopolitical tensions persisting, the sector must prioritise safety, resilience and innovation. Insurers like GT Marine play a critical role in navigating these challenges, providing essential coverage and support to ensure the continued prosperity of international trade. Moving forward, collaboration among shipping companies, insurers and policymakers will be paramount to safeguard the industry’s integrity and its vital contribution to Australia's economy.

This article has been prepared in collaboration with GT Insurance. In some cases, information has been provided to us by third parties, and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way. Any opinions expressed constitute our views at the time of issue and are subject to change. Neither GT Insurance nor its employees or directors give any warranty of accuracy or accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in this article. Global Transport & Automotive Insurance Solutions Pty Ltd trading as GT Insurance ABN 93 069 048 255 AFS Licence No 240714 as agent for the Insurer Allianz Australia Insurance Limited ABN 15 000 122 850 AFS Licence No 234708 is an issuer of marine insurance products.

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