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            september 17, 2019

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Ever-growing size of ships prompts concerns among marine insurers


Containerships have increased in capacity more than tenfold in the last 50 years, and risks have risen proportionally, according to insurer Allianz's 2019 Safety and Shipping Review.
"Insurers have been warning for years that the increasing size of vessels is leading to a higher accumulation of risk. These fears are now being realised, potentially offsetting improvements in safety and risk management," it said.
The review contrasted ships such as the 1968-build Encounter Bay with 1,530-TEU capacity with the 21,413-TEU OOCL Hong Kong built in 2017. Hyundai Merchant Marine has a dozen 23,000-TEU ships on order from Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries (SHI), and 24,000-TEU ships are under discussion.
"We've been talking for a while how the economy of scale for one portion of the industry, the marine asset, doesn't necessarily equate to an economy of scale for the entire supply chain," said Allianz risk consultant Andrew Kinsey.
"We're seeing this with the ultra large container vessels when we talk about port infrastructure - raising of bridges, of harbours, raising of cranes. And that's just to service them when they're in good condition," he said, reported American Shipper.
Mr Kinsey said the shipping industry should question whether it is running acceptable risks for large vessels. "There is a push for efficiency and scale in the shipping industry, but this should not be allowed to give rise to unacceptable levels of risk." he said.
"We continue to see the normalisation of risk in the shipping industry. There have been welcome technical advances in shipping, but we do not yet see a commensurate safer environment. There is now much talk of automation and autonomous vessels and how this will be safer. But in truth, innovation will be driven by the bottom line."
The 7,510-TEU Yantian Express, a Hapag-Lloyd containership that caught fire in January while crossing the Atlantic, is an example of how vulnerable large ships can be, Mr Kinsey said.
There is testimony from the crew that that fire started in a single container and that led to the general average of the entire vessel," he said. "It's shocking and people don't understand."
In another major casualty, a 2018 fire aboard the 15,226-TEU Maersk Honam, five seamen lost their lives. General average work was performed in Jebel Ali. "But you don't always get the situations where you can go into a United Emirates port equipped to handle those vessels and has extra capacity," said Mr Kinsey.
According to a presentation by Tony Brain of Braden Marine, the Maersk Honam was carrying 7,860 containers - 3,300 TEU and 4,500 FEU.
Damage was concentrated in the forward part of the ship, but still Allianz said "salvage and general average represented close to 60 per cent of the cargo value. A high contribution has also been requested for the Yantian Express."
Roanoke Insurance said its claims team historically saw general average and salvage security guarantee amounts ranging between 10 and 20 per cent, "but lately as evidenced with the Honam, these amounts appear to be on the rise. This is why it's so important to carry cargo insurance. Shippers interest cargo insurance protects a shipper's merchandise from physical loss or damage, covers general average losses and facilitates the process of releasing a shipper's cargo from the steamship line."

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