All right, thank you all for joining and welcome to the presentation of the Allianz Commercial Safety and Shipping Review, where we identify maritime trends to watch in 2024 from actual 2023 results. My name is Rich Soja. I'm the Global Head of Marine for Allianz Commercial, and I will be your host today.
With me, next slide please, thank you. With me is a distinguished panel of experts from around the Allianz world. Captain Rahul Khanna, our Global Head of Marine Risk Consulting, Régis Brudin, the Global Head of Marine Claims, Dr. Funke Adeosan, our Global Transition Solutions Director, and Eustace Heinrich, the Global Product Lead for Marine Hall, as well as the Head of Marine Underwriting for Germany and Switzerland for Allianz Commercial. We're going to cover several topics today. but also plan to save some time for questions and answers at the end.
First, we'll cover some maritime statistics from 2023, followed by a review of key losses. We'll examine some of the concerning trends for global shipping with separate sections for haul, cargo, as well as claims. We'll also look at decarbonization and sustainability in the maritime sector before we wrap it up with a brief...
overview of the insurance market. The Allianz Commercial Safety and Shipping Review is a market-leading publication that is a key focus for us here annually at Allianz. It provides an analysis of total losses and any key incidents in global shipping, as well as reporting on important industry trends, insights, and emerging risks.
This is our 13th year of publication. and as you can see from the slide it's available for download by visiting our website so without further ado let me hand it off to captain kama for his discussion very much rich and welcome everyone we are covering a lot of topics today so let me just get right into the numbers 2023 we uh the shipping industry saw 26 total losses maybe just a clarification on total losses these are vessels over 100 gross tons that we have been tracking as rich said for the past 13 years and these are our vessels which are lost including constructive total losses so 26 total losses in 2023 uh in the calendar year and for the past decade we've had 729 losses that we have seen The picture on your right just describes or details where these losses have occurred. And I'll go into a little bit further details in further slides. But as you can see, the largest area, the area where the largest number of losses have come from is South China, Indonesia, Indochina, and Philippines area. A total of 184 total losses in the last decade and eight losses in last year.
The other region where we see a lot of losses coming from is also the East Mediterranean Black Sea region. Next slide, please. We have seen a remarkable drop of up to 70% in total losses over the period of time.
I think it is fair to say that shipping industry has done such a fantastic job. If you consider in 1990s, the industry used to lose something over 200 ships every year. And 2023 saw as I said earlier only 26 losses.
This improvement in shipping safety record is down to many many factors. There are so many stakeholders within the shipping industry which are working very hard including the regulatory regime, including the ship owners themselves, classification societies, insurance included as well. So I think overall we can give a pat on the back to ourselves as part of the shipping industry. looking at this record over the last decade what we have done and in fact even more. I think it is fair to say that total losses is one of the metrics that we use to look at the shipping industry.
Some of the other metrics are also available and many organizations do that. However, given such a diverse industry and looking at the industry and so many players, I think this is one of the numbers which is probably the most accurate that we can use and hence we have been tracking this number of total losses for the past 13 years. Next slide, please. If you look at the regional distribution of these losses, South China, Indochina and Philippines had eight losses last year, which is an improvement by two. East Mediterranean Black Sea had two additional losses and they've lost six vessels in the region, followed by British Isles, North Sea, English Channel and Bay of Biscay area, where we saw three losses.
And then Japan, Korea, North China, again with three losses. The numbers on the right will give you the decade-wise distribution of these losses and for the last decade we've seen maximum number of losses that I was mentioning earlier coming from South China, Indochina region followed by East Mediterranean and Black Sea and then Japan, Korea and North China followed by British Isles and Arabian Gulf with 54 and 38 respective losses. a lot of times i'm asked the question why we see so many losses coming from uh the eastern bed from south china indonesia because it has been topping the list for many many years in a row there is no straightforward answer i think there's there's obviously the consideration that a lot of traffic goes through this region there are quite a few smaller number of vessels the coastal traffic within these this region and within the countries is is quite high but also the fact of the fact that this area is well is quite frequently impacted by typhoons in the region and then there is always an allegation which comes across that maybe the standards aren't as high as some of the other regions, but that, of course, is a regional view and some of the opinions.
Next slide please. If you now look at total losses by the types of vessels that have been lost, again, every year we see cargo vessels topping the list at 16 vessels that have been lost. followed by fishery and fishing vessels, which were four in number that were lost, followed by tugs, one chemical and product anchor. And then if you look at the right, you see the causes of loss.
Again, as we have seen in the previous years, foundering or sinking has been the highest cause for the losses of these vessels, which accounted for 13 vessels lost, followed by wrecked and stranded or grounded, and then fire and explosion. uh is also one of the causes it is interesting that every year we see a smaller number of vessels lost by fire and explosion but if you look at long term we always see fire becoming one of the one of the key concerns that we have in the industry i think in the last five years we have lost a total of 55 vessels due to fire and in 2023 alone we've had 200 fire incidents on board on both the vessels British Isles just has something to add to the last slide. The British Isles has become now the topmost place for the number of incidents that we see. If you go on the next slide, I'll explain a little more. So apart from the total losses, we also track how many incidents have happened or casualties have happened in the shipping industry.
The number for 2023 stands at 2951. And this is an improvement of 85, roughly around 3%. less number of incidents in the shipping industry. But this number over the years have remained relatively around the 3,000 number of marks.
So while the total losses have been declining, the number of incident and casualties still remains around the 3,000 level. So before we start celebrating about the total losses, I think there is a number which stumbles us a little bit to think about that we still have a long way to go. If you look at the figures on the right, the top 10 regions from where we see the incidents Which, by the way, include all the total losses as mentioned earlier, the top region has been British Isles, North Sea, English Channel, and then followed by East Mediterranean and then South China, Indochina region. Now, these regions, again, there is a little bit of concern and question sometimes on how these numbers are obtained because a lot of these numbers are dependent on the reporting standards of different regions and different countries.
Which is definitely not consistent in countries and regions across the world. So there could be an element that these numbers are slightly skewed because of the reporting levels, which might be higher in one region and lower in the other region. But overall, if we looked at this number, it still gives us a quite good indication of where the incidents are normally happening in the industrial industry.
Next slide please. So this was a snapshot of some of the numbers. maybe we should quickly have a look at some of the trends, the key trends that we have seen. And I think it'll come as no surprise to anyone when we say that the proxy war that is happening in the Middle East, in Gaza, and in the Red Sea has been on top of mind and has been the hot topic of conversation at every shipping conference of late. We have seen shipping being increasingly bought into conflicts across the world, whether it was Ukraine and Russia war, and now more importantly in the in the red sea region where where ships have come under attack frequently now and I think in the last month we've seen quite an increased activity on the vessels.
Only on Friday another vessel was attacked from another remote operated vehicle which was in shape of a vessel, a small fishing vessel which attacked the vessel and had significant damage. We still have seafarers unaccounted for in that particular attack. the concern that comes in from these attacks is that shipping is seen as a very easy target for groups, for insurgents, for terrorists, or any of such organizations who would want to get onto the center stage by making an impact. And as we have seen, there's a lot of impact that has happened out of coming out of these attacks on ships. And there has been a significant loss of vessels and life, unfortunately, as well.
There are other challenges that have come up due to these situations and these attacks because the ships have started to reroute across the South African coast and Cape of Good Hope, and that is adding something like 15 days, 10 to 15 days depending on the speed of the vessel, to the routes from the manufacturing hubs of the east towards the consumption centers of Europe and in America. Now that additional amount of time that each unit is taking as it also has a consequent impact on the cost of goods. And we've already seen quite a huge increase in the number, in the rates of freight on shipping containers from, for example, China to US, which used to be something in the tune of $2,000 or $1,000 to $2,000 are now up to $3,000 to $5,000, depending on different rates and conditions.
We've also seen another challenge within this war is the increase in types of attacks. We are now looking at highly sophisticated attacks in terms of missiles, in terms of drones, and also as I mentioned earlier, remote-operated vehicles on water, which can cause a lot more damage simply because they can carry a lot more payload when it comes to explosive power, which we saw on Friday. This is a really concerning development. Ships are really not made to counter these attacks.
Ships are essentially made to trade, and the seafarers are on board are not able to or do not have the facilities or equipment to deal with such a test so such a quite quite a really concerning picture and hopefully we can keep puffing across that this activity reduces in the in the future but it but it is more of a political issue rather than a trade issue that we are seeing here which we all in the industry hope that will become a lot better next slide please i'll hand over to my colleague just eustace who will discuss about the trends. Thank you. Thank you, Rahul.
Yeah, let's continue with high trends followed by cargo trends starting with the high outlook. Attacks against shipping in the Red Sea and Middle East waters together with the drought and the Panama Canal have amounted to a double strike for shipping. That means more disruption for global supply chains as well as longer trading distances. There are several impacts to consider environmentally, for example CO2 emissions, as well as from a risk exposure perspective, i.e. rough seas are more challenging for smaller vessels which are used to sail more coastal, for example, and the infrastructure to support large vessels in case of an incident, for example repair yard facilities or salvage operations.
Due to the tightening of international sanctions on Russian oil and gas exports, we see a sizable shadow fleet, even growing, of tankers, mostly older vessels that operate outside international regulation and often without proper insurance. Shadow fleet vessels pose a danger to other vessels and the marine environment while potentially evading liability under relevant liability. and compensation treaties.
They are mostly older ships, many operating past their traditional life spans with ownership unclear. It is likely they are poorly maintained and may not have undergone appropriate surveys or inspections. Shadow Fleet vessels have been involved in at least 50 incidents to date, including fires, collisions, and oil spills. There's a testing time for war insurance. There's no doubt the exposure is increasing, and other scenarios are also possible to imagine, giving us a higher potential for further...
claim on the horizon. So let's do not hope for that, but it's probably fair to mention it as we sometimes tend to underestimate these scenarios and focus just on potential to generate income. Next slide please. Ship size and blackouts in the spotlight after Baltimore Bridge collapse. From an unwriting perspective, the Baltimore Bridge collapse is just showcasing what can happen in times of larger vessels, and the vessel hitting the bridge was not even one of the largest.
It's good to develop into the largest marine claim so far, so even more costly than Costa Concordia. Always on the forefront still are the typical causes for claims, but with an increasing aspect of claims cost and complexity. This also has to be taken into account by our underwriters to manage a sustainable portfolio.
General average tends to be more complex and costly for large container ships. Yes, this is the headline, but not only for those. Talking about larger vessels and complexity of claims, Regis will refer to this later on. It can be highlighted also from an underwriting perspective that all related costs to general average are on the rise. Besides that, lengthy settlement processes due to the increasing complexity are not only a claims handling aspect but also evenly important for the underwriting process and a variation of the scope of the coverage and limits given.
Next slide, please. So here we are with the cargo tracks. Larger vessels are also an important aspect for the cargo insurer, as we see a considerable increase of potential accumulation.
Accumulation has also not to be underestimated when it comes to the storage of cargo, and not only, but in particular related to cut exposure. There's a significant increase in theft of cargo depending on the geographical area and both in terms of storage and cat we can just ask for the highest level of data accuracy to give us as the insurers the best way possible to come to a fair pricing assessment and also to come to a fair risk exposure assessment there is some way to go for us as an industry All that said, it is from our point of view crucial not to forget the lessons learned in the marine insurance market before we entered into a hardening market environment. Some might have in mind what happened five, six years ago in our market.
Trends are concerning and sustainable pricing as well as risk assessment is key to remain a reliable carrier in the marine insurance world. Here I'm handing over to my colleague from Claims, Regis Bruder. Regis, you are on mute. Yes, sorry. Thank you, Rich, and thank you, Jesus.
I will start for the Claims train with the theft and natural catastrophes you... you just mentioned. Just to start with the current economic environment and cost of living, there is a much greater incentive to steal, while theft of high value cargo such as mobile phones and other desirable electronic consumer goods has increased.
More and more lower value consumer household goods and food items easy to to sell on a grey market are becoming attractive to criminals. The increase in the number of cargo theft is a clear trend in our AGCS claims portfolio, especially in the US when we have seen in transportation and logistics an increase by factor 6 from 2019 to 2023. Criminals focus on theft from trucks and hijackings. But at the same time, we see criminals using more sophisticated and organized methods to gain access to cargo, often employing technology and forging bill of ladings.
Natural catastrophes are more and more frequent and intense. And this is the main trend we see impacting cargo and more precisely, cargo in storage. Cargo in storage is actually a static risk, more vulnerable to cat events and also, by the way, to fire loss.
The largest cargo claims we have had over the last... two years were related to fire losses and cat events. The recent torrential rains which caused severe flooding in the state of Rio Grande in Brazil have generated major cargo losses.
It is not the first time that there are floods in Brazil but this time the higher severity of the floods has caused higher losses with also less salvage opportunity. Can we switch to the next slide please? War risk.
So as you we all know the war risk in Ukraine is ongoing with several still several vessels and cargoes that are still blocked in the area. In another part of the world the spate of attacks in the Red Sea by the Houthis began on the 19th of November with the hijacking of the Car Carrier Galaxy Leader and its 25th crew members and have been targeted by the UTs in response to the conflict in Gaza, in response to the war between Israel and the Hamas in Gaza. One of the most The first damaging incident was the vessel Rubimar.
The crew abandoned the vessel after she was struck by two missiles. The vessel eventually sank in March 24 this year, marking it the first total loss of a commercial American vessel since the Houthi attacks began. Days after the loss of the Rubimar was the first fatal attack on commercial shipping by the Houthis.
And the first of On the 6th of March, a missile hit the cargo vessel True Confidence, resulting in the loss of three crew members. The damaged vessel was abandoned off the coast of Yemen, port of Aden. More recently, mid-April, the container vessel MSI Ares was seized by the Iranian authorities while she was passing through the Strait of Hormuz.
The vessel is still detained. Last week, Raoul mentioned it, three vessels were attacked by the Houthis. One of those vessels, named Tutor, has lost a crew member and has suffered serious damage.
So we see that more and more the attacks are, if I may say, successful and causing serious damage and also, unfortunately, loss of life. Those war risks generate a complex claim handling. Most of the war is covered. have blocking and trapping clause in application to which insured ship owners can claim for a total loss after 12 months of blockage or detention.
So that the way and the timing to set up a case reserve is a difficult decision to take for the claims handler, for the claims manager. I can also give very quickly the example of a vessel and a part of her cargo. which were damaged by a missile attack. We are involved, AGCS, on the cargo cover. The vessel is still stuck in the area three months after the incident.
It has been, for three months now, it has been tough and complex negotiations with the ship owners to pursue the voyage to the final destination. it has also been very difficult to have a cargo surveyor on site due to the dangerous environment. So it shows you how complex it is to solve this kind of situation. As a consequence of the attack in the Red Sea, At the start of 2024, the transit in the Suez Canal reduced significantly by 42% and almost 600 containers vessels had to be rerouted around the Cape of Good Hope, adding at least 3,000 nautical miles and around 10 days sailing.
As we have seen with the COVID-19, the grounding of the Ever Given and the war in Ukraine. we can anticipate that rerouting of vessel will generate supply chain disruption leading to delays in obtaining spare parts and increased costs for ship repairs. So this supply chain disruption is continuing and could cause additional costs especially in the ending of the hull and machinery claims.
Furthermore, rerouting vessel selling in remote area could lead to higher salvage and general average cost. The larger the vessel, the larger the potential claim. This is a trend we have highlighted over the last two, three years. As we have seen this year again, larger ships are not resulting in a higher frequency of accidents, but when something goes wrong, the scale of damage is likely to be much more severe.
Because, as already said, responding to incidents is more complex and expensive with large vessels. Large vessels involve a higher cost of salvage, higher cost of wreck removal, requiring special tugs, cranes and salvage equipment. They also face difficulties finding a suitable port of refuge, as we already know also from experience we had in the recent past.
All those factors drive up costs and lead to a higher contribution to general average. General average cost increase is a continuing trend. The general trend we have seen is more frequent general average cases which higher contribution for cargo and health interest.
We can also add the fact that civil infrastructure didn't anticipate such a large vessel. and the vessel daily loss causing the collapse of the baltimore bridge is a good recent example of what i i just said um as i mentioned in our safety and shipping report by our captain raul cana back in the 70s when the franciscote k bridge was built container ships would have been less than half its size probably even a lot less i would say that a smaller vessel, encountering the same kind of technical problem, would maybe have succeeded in avoiding the collision with the bridge by doing the same maneuvers. As far as the complexity of the response is concerned, the vessel could be refloated only two months after the incident and after complex operations to remove the debris of the bridge. The vessel is still blocked in Baltimore terminal for FBI criminal investigation. Ship owners have declared general average.
We can anticipate the GA contribution will be at a high level. I leave now the floor I think to Funke for the decarbonization topic. Thank you.
Thanks Regis. Right. Hi everyone.
So I'm going to be talking about decarbonisation trends in the maritime sector. So one of the biggest things, obviously, is the change in regulation. You know, there's a lot of new industry targets and regulatory developments going around, which means that there is a greater urgency for innovation. And all of these targets will continue to go up.
you know, it means that there is going to be a shift to alternative fuels like ammonia, methanol, hydrogen, and that will potentially redraw the risk profile of the maritime sector. So obviously with things like ammonia, methanol and hydrogen, there is a need to, you know, redesign engines, there's a need to look at the types of fuel that are going to be used, the types of fuel systems, the risks associated with those, the failure rates and all of these things are increasing trends and changing trends within the maritime sector. simply because of the need to decarbonize and reduce carbon emissions in the future.
In addition to this, the IMO particularly has a new strategy which is to reduce the, to reach zero emission fuels by 2050 in the maritime sector. And this is not to be confused with net zero, which is a slightly different thing. Net zero means you're netting off what you emit with either carbon capture or something like that. Zero emission fuels basically means hydrogen and methanol so fuels that have no no emissions at all which means a complete redesign of how you know your power ships uh in the current um the current way that we power ships so it's a massive change for the industry and there's a lot of uh you know uh need to see what we can do from a from uh from an insurance perspective and this is a growing trend going forward as we approach 2050 which is the target for most sectors around the world if we go on to the next slide So, yeah, to kind of meet these new regulations and requirements, the sustainability requirements that is now put on certain industries around the world, including the maritime industry, means that we need to focus on ESG. So ESG is a framework.
You know, most people tend to confuse sustainability and ESG as the same thing. Sustainability is the thing we're trying to achieve. ESG is the framework by which industries particularly tend to get there.
So as all sectors start to focus on ESG because, you know, regulators, investors, customers and other stakeholders are pushing towards this, it means that, you know, the need to have a different way of approaching the emission strategy for each sector is changing, is increasing, is intensifying the focus on ESG itself. And this also could affect how, you know, companies could access capital and insurance because. insurance professionals. Well, there was some article from Woodrow Consultancy saying that 64% of UK insurance professionals are considering reducing their investment in the maritime sector due to ESG risk. And also 66% of UK financial professionals believe the maritime sector faces greater ESG related financial risk compared to other industries.
And also remember that the maritime sector I think is responsible for about 3%. of the CO2 emissions globally, which is bigger than some countries around the world. So there is a massive focus to try and decarbonize this sector, which means that ESG is a high priority for both shipping companies themselves and insurers like Allianz alike. So going forward, you know, working together and trying to follow these trends, be more proactive, making sure that we respond to the changes that are happening in the market is really quite important to both sectors. If we go on to the next slide, which basically looks at one of the biggest changes in the maritime sector, which is this massive boost in polar shipping.
So it's very topical because vessels are now sailing in Arctic waters and it's growing with commercial interest. For example, the number of unique ships that were entering the Arctic polar code area from 2013 to 2023 has increased by 37%. So that's around 500 vessels.
and the distance that is sealed in the Arctic polar code area increased from 6.1 million to 12.9 million nautical miles. These are massive changes and increases in trends and this is being driven pretty much by climate change and global warming because there's less sea ice and there's a lot of the older thicker ice meaning it's easier to navigate these areas, there's longer navigation seasons and all these previously difficult to access regions are now accessible. which is good for trade itself but fundamentally it means that there are new risks and there are new trends and issues that we need to be considering and even if we leave aside the climate change aspect itself and we focus on what this means for sustainability and insurance it means that there is a there are new risks that are emerging to vessels higher risks in some cases there are risks to cruise themselves they risk to the environment And that means that we need to create new and more innovative insurance solutions and advisory services to help cover these emerging trends and risks.
For example, if you think about, you know, if you have an incident in a polar region, say, for example, a damage to a vessel that leaks oil everywhere, the ability to salvage and recover that vessel, the ability to clean up the oil, the labor costs associated with that because of the remoteness and the unfamiliarity with that region. is more than it would be in normal circumstances that we're used to. And all of this means increased costs, which means that a different way of looking at the risks associated with this and potentially increases in the insurance needs of those types of damage scenarios.
All of this to say that, you know, climate change is making a difference in terms of where shipping is going. And there is that means that fundamentally there is a need to integrate what we're doing in terms of sustainability and sustainability solutions and how we, you know, come to to to look at these risks with the growing trends in future. And I think that might be my final slide. So I will hand over now to Richard, who is going to summarize the presentation.
and conclude the session for today. Thank you. Thank you very much, Fung-K.
And thank you to all of our presenters who've looked at the statistics, the cargo trends, hull trends, claims trends, and now, just now, the decarbonization journey. So amazingly, we're almost spot on for time, but let's take a quick look through an insurance lens on these couple of questions and what do these maritime trends mean for insurance. And as critical as maritime trends are, they contribute to but do not dictate the dynamics in the ocean marine insurance marketplace, right?
So the overall property and casualty insurance world remains in generally a profitable position and has seen or but has seen increased competition over the last year or so. In most cases, rates are still increasing or at least neutral. And marine insurance is influenced by the general PNC insurance market, of course, and it's in a similar state with generally adequate capacity in both hull and cargo. Very specific to marine and in a very specific area, the conflict in Gaza and the increased hazards sailing through the Red Sea have, of course, seen a spike in war rates for hull traveling through the region.
At the moment, based upon the way it's structured, the war perils afforded under the cargo policy really remain unaffected. Looking forward, it's very difficult to tell the direction the marine insurance market will take. With increased capacity and new players, a strong argument could be made to suggest that the market will continue to become more competitive.
However, the trends mentioned in the Allianz Safety and Shipping Report may also play a role in stabilizing the market, whether it be from climate change, impacting not only cargo and haul, but static risk as well, since, as Ruchis mentioned earlier, it's more exposed. An escalation of war, whether it be in the same region or elsewhere, and that could impact, of course, both haul and cargo, or additional clarity as we move forward around the ultimate payout of the Baltimore Bridge Collapse. So if that event exhausts the entire layer of the international group insurance tower, it would clearly significantly impact the marine reinsurance market, which might then drive up prices for the primary insurer. That has yet to be seen. So in the meantime, Allianz Marine will be there playing an active role in the market, supporting our brokers and clients.
as well as watching and reporting out on the emerging hazards and statistics in 2024, which we'll tell you about, of course, in 2025. So that will wrap up the formal part of the presentation. In the lower right-hand corner of your screen or your text box, you should see the ability to type in some questions. We already have several, so I'm glad that we saved some time.
And with that, we will get right to it. So we'll start at the very top. What would Allianz define, and Justus, I believe this came during your portion of the presentation, what would Allianz define as, quote, proper insurance versus what the shadow fleet are using?
Yeah, proper insurance might be from our perspective Western insurance capacity, which is properly rated. and also reliable in terms of P&I coverage, in particular when we are thinking about an oil spill situation or a collision situation. We quickly talk, in particular when it's a tanker involved, about oil spill, so P&I, and also when it comes to, say, proper counterpart on the opponent's side. when it comes to methods of recourse, for example.
All very good points. Thank you. Next question.
Is it natural to expect... It is natural to expect the highest absolute loss numbers in areas with the highest traffic density. Have you tried to put the absolute loss numbers in relation to the traffic in these areas to get the loss frequency in relation to the traffic?
Anyone for that? I can. Try to answer this one. It's a tricky one in the sense that the short answer is yes, we have tried in the past. The difficulty with this is that the data that comes in on shipping movement is still sketchy.
It cannot be properly verified. If we normalize the losses as the question is suggesting that each loss for each region takes into account the number of ships that pass through it. For example, if you take the English Channel and British Isles area, there'll be a lot larger number of vessels, you probably will have a slightly different picture. But when we tried that some years ago, the results were quite confusing, shall I say, and did not present a homogeneous picture or anything that we would expect. The question still is that do we have the accurate data?
to do this sort of analysis to normalize all the losses based on the number of crossings or or vessels in that region we already know a lot of ships are are switching off their ais's when they are moving around these days um and also a lot of others do not just simply use that so um especially a lot of vessels uh smaller ones so that so we have tried as i said but it doesn't show us a picture which is worth presenting and as i said earlier the the number that is really accurate over the years and which we can track year on year is really the total loss number because that is reported quite accurately and there's a lot less ambiguity about that number. We do get some lag on that number because some losses which are partial losses in the year, they become total losses after a significant period of time, which then gets included in the next year's numbers. But otherwise, I think it's a very tricky one to normalize it. That's matter indeed.
Next question, good question. In older Allianz safety and shipping reviews, there were also claims trends included which were derived from Allianz's own claim records. These were interesting as LLI does not capture all claims paid by insurers and also has somewhat different categorizations.
Are there any plans to include trends based on Allianz's own stats in future reports again. So, Captain Rahul, I know that you're very involved in many of these numbers, and my understanding, looking back at old reports, is around every other year we try to include some of our own analysis into the overall results, but perhaps you can comment on what you've seen offline in 2023. Yeah, sure. I think we have included, as I said in the past, and we definitely do plan to have whenever the relevant information comes out from our own analysis. Of course, we have to be a little careful because these are only Allianz-experienced numbers, and it does not represent the market reality.
Although Allianz still is one of the largest marine insurers there, we still don't have… picture to paint globally if we look at only our numbers. But it still gives us quite a few insights as we've done in the past and I think I'm sure we'll do in the future. Maybe just to share that the last time when we did this, we did the analysis something like 250,000 claims that we saw between 2017 and 2021. And 18% of the claims and losses came from fire and explosion as an example.
and then 17% came from shipping incidents like sinking, collisions, etc. There are other causes which contributed to it, like 12% was because of damaged goods, including handling damages or storage damages, and then machinery breakdown, which was 12% of the overall 250,000 numbers. 9% came from natural catastrophes like hurricanes, storms, floodings, and wildfires as well.
But I'm sure we... We do our effort is to keep trying to include as many different numbers as possible. But there's always a challenge of verifying the data available and whether it is relevant to the global picture or not is some of the challenges that we face.
Great, thank you. Next question. Last year, we had a record low for total losses. Do the panelists think this is the lowest possible? Maybe.
I'll give it a first shot. I mean, we certainly hope this is not the lowest. We certainly hope that it becomes zero for everybody in the industry. Unfortunately, a lot of these losses comes with loss of life and property.
And the ideal scenario would be that we reach the number of zero in total losses in the coming years. The trend certainly encourages that view and that thinking. I think one of the reasons why insurance really exists is because we have losses. So I think this will always be there. There will be unfortunate incidences.
unintended consequences of some of the actions that will give us some losses. I'm not sure this is ever going to be going to be the lowest. It may go a little lower but again if we look at a larger picture I think the industry has done great work over the years to reduce the number from the likes of 200 plus in the 90s to what we have today a very small number of 26 total losses. and I just hope it continues in the downward direction or at least does not go back up again which is which is the most important thing.
And maybe if I can add a comment as far as the total loss are concerned so if we talk about the constructive total loss coming from the war risk cover I quickly mentioned a few minutes ago we can say that over the last year we have seen an increase of the two last years you know an increase of constructive total loss after you know in the in application of the blocking and trapping close in the war risk policy so this is a specific trend coming from the war risk losses thank you regis next question it appears fires on vessels associated with misdeclared cargo is down is that due to positive actions taken taking place by all parties or have we just been lucky in 2023? Again, I'll give it a first shot. I think Mr. Clay cargo still remains one of the key concerns that we have and that we see continuing over year and year. Just that The number may be a little down last year.
It does not, in my view, take it from the top concerns that we have in the industry. I think the potential for a mystic-laid cargo on some of the larger vessels that we see around can be catastrophic, as we've seen in the past. All it takes is one single container of mystic-laid cargo starting a fire deep within the holds of one of the larger vessels.
And if we are unable to control... which has been the case in so many previous instances, it could lead to a total loss as well. So I would not just take any, be complacent about the fact that the number is a little bit lower than last year. I think Mr. Claire Cargo remains one of the key concerns and this has been raised not just by us repeatedly but by some of the other organizations as well that do track this and there are a lot of efforts which are going on in the industry to tackle this. we are looking at new ways to deal with identifying mystical cargo which is really a very challenging job to be honest there are millions of shippers around the world shipping millions of containers on a daily basis which we need to we need to be sure that somehow we have the ability as an industry to make sure we can track any of the mystical cargos so it doesn't give me any sense of security that the number is down a little bit.
In fact, if anything else, I'm still pretty much concerned about this. Great. Thank you, Rahul.
And let me tie in just a slight commentary on that with our next question, which involves AI. You mentioned it, but there are new technologies and newer versions of technologies now on this declared cargo that become, are self-generating. and become ever more sophisticated in terms of identifying unusual declarations from origins that traditionally have not exported that sort of cargo and so on.
So there are one vendor in particular, but several out there who are really focused in that area that will help us pinpoint using AI. additional problems potentially in the future, which leads to the question, how do you see AI impacting the future of marine insurance underwriting in claims? And how is Allianz using AI in marine underwriting? So, Justus, why don't we start with the underwriting side, if I can hand over that question to you.
Sure. So I think there are multiple aspects. One you just raised. The others could be.
be for example when it comes to due diligence aspects so there's i think a lot of potential to get say more granular and more safe and also quicker in analyzing potential due diligence risks using ai just thinking about the spoofing when ais signals are manipulated Also when it comes to the pricing element of the underwriting exercise, because pricing tools are always an important part as a benchmark in the underwriting process, helping the underwriter to come to a price, not giving the price and full stop, but helping the underwriter, giving a benchmark. And AI is also an important part when forecasting loss trends. with market data, not only own data.
So enriching own data with market data, anticipating trends out of that, and using AI to get it more objective, less subjective. These all could be areas. Yeah, I completely agree from the underwriting side. It's not, from my view, it's not replacing the underwriter. It's amplifying the ability of the underwriter.
It's providing a sign so the underwriter can practice their art, and it becomes more efficient as well, which allows our expense ratio to get better, which makes us more competitive and provide sustainable pricing for our clients and brokers. Regis, anything on the claim side you want to comment on for AI? I'll take that as a no, though you're on mute.
We will go to the next question then. In the case of the Baltimore Bridge, what is the approach as respects proper independent defense system in order to protect the new bridge moving forward? I think there are various ways in which we already protect our infrastructure against impact from bridges.
There are often the key load-bearing pillars of bridges and keys and piers are generally protected by impact absorbers, whether it is a concrete wall, whether it's a collection of rocks put around so that the collision impact is taken by not the bridge stress or the key load-bearing member, but something else in between. So that has been already been practiced for several years. It depends on the particular construction. Unfortunately, this is not consistent across the world.
We see a lot of the infrastructure still around operating, which were built in the early parts of the century, some dating back more than 100 years, that we have to deal with. And as we said, as the ships become larger, the impact of those collisions. is exponentially high as we go down. So I think there are various ways that this can be done. Another way that has always been suggested is when you are looking at a possibility of interaction between larger ships and key infrastructure, there's possibility of tugs assisting the vessels, at least for the short period of time.
We understand it's always not possible for large piloted waters where to have tugs all through with all the vessels. That would mean hundreds of tugs being required by the port. at least in certain crossings at certain sections and a small period of time where we have that in close quarter situation between a large vessel and key infrastructure those those can certainly help of course um there are there are quite a few ways in which we ensure already that the ships are ready they're prepared they are tested uh before they put out to sea there's there's a lot of pre-sailing departure checklist that the vessel needs to make sure the engines are fine Their systems are working correctly. And unfortunately, the reality is, you know, loss of power on ships is still not an unusual incident. It happens quite frequently.
To me personally, the outcome of what happened with the Baltimore Bridge collapse was one in a million. sort of an event. Any small thing would have, any small change in the chain of events that happened that day could have prompted a very different outcome than what we got.
So yeah, but clearly a lot of people, a lot of stakeholders in the world need to really think about the infrastructure and are they protected enough? I think that's the key question. Thank you, Rahul.
I think we've got time for one more question. What are your insights on the risks associated with unmanned vessels? If possible, could you also share how to analyze these risks? Okay, maybe I'll go give another try.
Just to share, only last week I was attending the Chamber of Shipping Conference Summit in Montreal. It was more of a closed-door conference between ship owners. regulators around the world and the question of unmanned vessel did come up and one of the key questions that is being asked again and again is really is our unmanned vessel solving the key problem for the industry? Is there a problem statement that we are solving by using unmanned vessel?
I guess that this question sort of answers in itself why we haven't seen so many unmanned vessels around till date in despite the technology being available for many many years already. To answer the question directly, at the moment the problem is with the regulatory aspect and liability aspects of how we should deal with an incident if that happens with an unmanned vessel, who should ideally and eventually take the plane or the liability for such a collision or any such incident that happens. So that part is still the one where we are still trying to figure out how to solve this.
Technology wise I think the a few vessels are already in place, they are already operating in unmanned condition between, but they are all in a small segment between point A and point B, fixed routes, coastal regions, where the risk can be controlled a lot more. I think, I still feel that it's quite a few years before we will see unmanned vessels in the mainstream shipping lanes across the world, and that's still going to take some time. I think, till the time that happens, the question of how do we analyze those risks, how do we work on those risks, is still out there, still open.
There's a lot of work still needs to be done before we get to that point. Great. Thank you, Captain Rahul. We have come to the close of our presentation.
Thank you to the presenters, but especially thank you to all of the attendees. At its peak, we were close to 250. The webinar has been recorded. And in the near future, it will be posted to our website as well. So you'll be able to go back and revisit it. And if there are remaining questions, there's one in the queue.
If there are other questions, please do not hesitate to reach out to us. And we're happy to give you our insights and opinion after the session has closed. So thank you once again and have a great afternoon.