Fire, collision and sinking, and damaged cargo are the top causes of marine insurance losses by value according to Allianz Global Corporate & Specialty's (AGCS) analysis of more than 240,000 claims worth EUR9.2bn in value.
The analysis reveals that inflation is compounding existing trends driving higher claims severity. Soaring prices for steel and spare parts and rising labour costs are impacting hull repair and machinery breakdown claims. Supply chain issues continue to impact claims, as does climate change through extreme weather events and new exposures linked to the net-zero transition.
According to AGCS fire and explosion incidents cause the most expensive insurance claims in the marine industry, while at a time of rising exposures and inflation, cargo damage is the most frequent cause of loss.
The analysis is based on more than 240,000 marine insurance industry claims worldwide between January 2017 and December 2021, worth approximately EUR9.2bn in value, and has identified a number of claims and risk trends that are driving major loss activity in the sector.
AGCS global head of marine claims Regis Broudin said, “The number of fires on board large vessels has increased significantly in recent years, with a string of incidents involving cargo, which can easily lead to the total loss of a vessel or environmental damage.”
“At the same time, the shipping sector is also having to deal with many other challenges including a growing number of disruptive scenarios, supply chain issues, inflation, time-pressured crew members and employees, increasing losses and damages from extreme weather events, implementing new low-carbon technology and fuels, as well as Russia’s invasion of Ukraine.”
The value of both vessels and cargo has been increasing at a time of growing exposures associated with bigger ships, the largest of which can carry 20,000 containers at one time. The combined value of the global merchant fleet increased 26% to $1.2tn in 2021 while the average value of container shipments has also been rising with more high-value goods such as electronics and pharmaceuticals. It is not unusual to see one container valued at $50m or more for high-value pharmaceuticals.
Damaged goods, including cargo, is the top cause of marine insurance claims by frequency, and the third largest by value the analysis found. The most common claims are physical damage, typically from poor handling, storage and packing. However, recent years have also seen a number of high-value theft and temperature variation claims – the latter can particularly impact pharmaceuticals.
Theft is the third most frequent cause of claims with criminals targeting consumer electronics and high-value commodities such as copper. Cargo is typically stolen from ports, warehouses or during transits. The recent boom in container shipping has also affected cargo claims with a global shortage having resulted in substandard and damaged containers being brought back into use resulting in losses.
AGCS global head of marine risk consulting Captain Rahul Khanna said, “The risk of theft and damage to high-value cargos needs to be addressed with additional risk mitigation measures, such as GPS trackers and sensors that provide real-time monitoring on position, temperature, moisture shock, and light and door openings.”