Shipping losses continued their long term downward trend, with 85 total losses reported worldwide in 2015, according to a report from Allianz Global Corporate & Specialty SE (“AGCS”), which analyzed reported shipping losses of over 100 gross tons.

Although the number of losses remained stable year-on-year, declining by just three percent compared with the previous year (88), 2015 was the safest year in shipping for a decade. Losses have declined by 45 percent since 2006, driven by an increasingly robust safety environment and self-regulation. However, disparities by region and vessel-type remain, according to AGCS.

More than a quarter of all losses occurred in the South China, Indochina, Indonesia, and Philippines region (22 ships). Losses increased year-on-year, unlike other major regions.

Cargo and fishing vessels accounted for over 60 percent of ships lost globally, with cargo losses up for the first time in three years. The most common cause of total losses was foundering (sinking), accounting for almost 75 percent of losses, up 25 percent, and often driven by bad weather.

According to the AGCS report, there were 2,687 reported shipping incidents (casualties including total losses) globally during 2015, down four percent. Activity was spread across all days of the week, although Thursday saw the most incidents and Saturday the fewest. The East Mediterranean and Black Sea (484) remained the top incident hotspot. Three vessels shared the accolade of being the most incident-prone – a ro-ro in the Great Lakes region, a hydrofoil in the East Mediterranean & Black Sea, and a ferry in the British Isles – with 19 incidents over the past decade, AGCS reported.

Although the long term downward trend in shipping losses was encouraging, AGCS said that the continuing weak economic and market conditions, depressed commodity prices, and an excess of ships were pressurizing costs, raising safety concerns. AGCS said that it had seen an increase in frequency losses over the past year that likely could be attributed to some extent to this environment.

“The economic downturn – and its impact on the shipping sector – is likely to have a negative impact on safety,” said Captain Rahul Khanna, the global head of marine risk consulting at AGCS. “Many sectors, such as general cargo, bulk, and offshore, are already challenged and any drop in safety standards will be a serious case for concern.” Economic pressures should not allow a “put it off until later” safety mentality to develop, AGCS experts warned. Some shipowners already are stretching maintenance to longest possible intervals while others are laying-up vessels. “Reactivation of these vessels to a market that has moved on technologically may result in a painful exercise. There is a need for standardized lay-up procedures,” said Captain Jarek Klimczak, the senior marine risk consultant at AGCS.

As well as impacting investment in vessel maintenance, cost pressures can impair crewing conditions, passenger ship safety, and salvage and rescue, the AGCS report observed. AGCS said that it had seen an increase in fatigue-related insurance claims over the past decade. With crew numbers already often at their lowest possible level, and a future staffing shortage anticipated, longer shift patterns could exacerbate this issue. Meanwhile, training remains below par in some areas, such as electronic navigation, which should not be seen as panacea but as a complementary tool, the report added.

AGCS said that although significant progress had been made in passenger ship safety, concerns remained, particularly around non-international voyages. Some parts of Asian domestic trade are years behind international standards, as evidenced by a number of recent ferry losses in South East Asian waters. Profit pressures mean scheduling maintenance can be challenging.

The appetite for ever-larger container ships has seen cargo-carrying capacity of the largest vessels increase by 70 percent over 10 years to 19,000+ containers. Two “mega ships,” the CSCL Indian Ocean and APL Vanda, were grounded in February 2016, raising questions about a more serious incident, according to AGCS. There are concerns commercial pressures in the salvage business have reduced easy access to the salvors required for recovery work on this scale. The industry may need to prepare for a $1 billion+ total loss scenario, AGCS warned.

The report also noted that exceptional weather events are becoming more commonplace, bringing additional risks and disruption to supply chains. This year, the effect of a “super” El Niño is expected to lead to more extreme weather conditions. Meanwhile, bad weather was a factor in three of the five largest vessels lost last year, including the El Faro, one of the worst U.S. commercial maritime disasters in decades. “The fact that superstorms are causing ships to sink is concerning,” said Sven Gerhard, the global product leader for hull and marine liabilities at AGCS. “We are seeing more and heavier natural catastrophe events. Weather routing will continue to be a critical component to the safe navigation of vessels.”

The shipping industry's reliance on interconnected technology also poses risks, according to AGCS. Cyber risk exposure is growing beyond data loss. There have already been a number of notable cyber incidents and technological advances including the “Internet of Things” (“IoT”) and electronic navigation means the industry may only have a few years to prepare for the risk of a vessel loss. “Pirates are already abusing holes in cyber security to target the theft of specific cargoes,” said Captain Andrew Kinsey, the senior marine risk consultant at AGCS. “The cyber impact cannot be overstated. The simple fact is you can't hack a sextant.”

For the first time in five years piracy attacks failed to decline in 2015. South East Asian attacks rose, accounting for 60 percent of all incidents. Attacks in Vietnam surged year-on-year.

Other risks identified in the report included:

Lower emissions safety threat: There have been unexpected safety implications from the shipping industry's drive to reduce emissions, resulting in power issues related to rising use of ultra-low sulfur fuel. AGCS said that it has seen an increase in machinery claims related to fuel.

Arctic casualties rising: There were over 70 reported shipping incidents in Arctic Circle waters during 2015 – up almost 30 percent year-on-year, the highest in a decade.