Safety and Shipping Review 2021:
Larger vessels. Larger exposures

The latest in a growing list of incidents involving large vessels, the Ever Given has added to concerns in the industry that the risks associated with large ships may soon outweigh the benefits. “We need to look more closely at how we can minimize the risks of mega-ships, especially in ports or in bottleneck passages like the Suez Canal or the Panama Canal, given the disruption we have seen that grounding incidents can cause. If a ship runs aground in one of these waterways, specialized tugs would be needed and the port and canals should have access to adequate resources in relatively short time,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS.

Container ships, car carriers and bulk carriers have grown larger in recent decades as shipping companies seek economies of scale and fuel efficiency, a trend that is likely to continue with climate change and the introduction of greenhouse gas emissions reduction targets for the industry. Despite the Covid-19 pandemic, ever larger vessels are on order. In December 2020, Ocean Network Express ordered six new container ships with capacity in excess of 24,000 teu. The HMM Algeciras, introduced in April 2020, is currently considered to be the world’s largest container ship with capacity of just under 24,000 teu.

While economies of scale have helped drive the trend for larger and larger vessels, there have been unintended consequences, according to Captain Andrew Kinsey, Senior Marine Risk Consultant at AGCS.

“Just because it is possible to build large ships, it does not mean we should,” says Kinsey. 'The different consequences of larger vessels are now becoming more apparent, including impacting supply chains. Large vessels and the ports required to handle them present a massive accumulation of risk, while the costs are disproportionately greater when things go wrong.”

For a number of years insurers have warned about the growing risks associated with larger vessels, including the problem of fires on large container ships, says Justus Heinrich, Global Product Leader Marine Hull at AGCS. “Exposure continues to grow as more large container ships and cruise ships are added to the world shipping fleet. We have continued to see a number of near misses over the past year. The blocking of the Suez Canal shows these concerns are valid.”

Insurers have already seen a number of very large claims from fires and groundings for large container ships as well as fire and stability issues for car carriers. Large ore carriers have also seen losses while the grounding of the cruise ship Costa Concordia remains one of the most expensive marine insurance losses in modern times at almost $2bn. The Suez Canal Authority has sought around $600mn from the Ever Given's liability insurer and the Egyptian government detained the vessel as it negotiated with insurers. A compensation deal was eventually signed in July 2021, leaving the vessel free to leave the waterway.

More recently, the industry is seeing the biggest spike in lost containers at sea in seven years. “Large claims from container ship fires and groundings, as well as the loss of thousands of containers at sea, all have one common thread – the increasing size of vessels,” says Khanna.

In 2020, the number of incidents fell slightly, but was still above the average, according to the Norwegian Association of Marine Insurers (Cefor) [3]. Although the past year has not seen container ship fires on the scale of the Yantian Express, Maersk Honam and the MSC Flaminia incidents that have made headlines in recent years, smaller fires and near misses are still a regular occurrence. On average [4] there was approximately one fire every two weeks in 2020. In May 2021, the Singapore-registered container ship X-Press Pearl, which had been carrying 25 tonnes of nitric acid, along with other chemicals and cosmetics, became the latest casualty when it caught fire and sank off Sri Lanka, resulting in the potential loss of almost 1,500 containers and the prospect of significant environmental pollution.

The Cefor statistics found no reduction in large loss frequency for container vessels, despite a substantial reduction in claims frequency and cost for hull claims overall in 2020. Container ship fires were especially prevalent, with a notable increase in the frequency of fires costing over $500,000.

Vessel size has a direct correlation to the potential size of loss. Car transporters/RoRo and large container vessels are at higher risk of fire with the potential for greater consequences should a fire break out, according to Cefor analysis. The larger the number of containers on board, the higher the probability that at least one could ignite and cause a fire, and the harder it is to contain and extinguish the fire.

Container ship fires often start in containers, which can be the result of non-declaration or mis-declaration of hazardous cargo, such as self-igniting charcoal, chemicals and batteries. When mis-declared, these might be improperly packed and stowed on-board, which can result in ignition and/or complicate detection and firefighting. The other contributing factor is the fire detection and fighting capabilities relative to the size of the vessel. Major incidents have shown container fires can easily get out of control and result in the crew abandoning the vessel on safety grounds, thus increasing the size of loss.

Following an investigation into the 2018 Maersk Honam container ship fire, the Transport Safety Investigation Bureau [5] (TSIB) of Singapore became the latest organization to call for improvements to fire detection and prevention on large container ships. The Flag State and World Shipping Council subsequently submitted a joint paper to the International Maritime Organization suggesting amendments to the international maritime safety law SOLAS and the International Code for Fire Safety Systems regarding fire protection, detection and extinction arrangements on large container ships. TSIB's investigation was unable to conclusively determine the cause of the fire on the Maersk Honam, which resulted in the death of five crew. However, it suggested the spontaneous self-decomposition of sodium dichloroisocyanurate dihydrate (SDID), which is commonly used in bleach and cleaning products, may have been to blame. TISB recommended the IMO review SP 135 for the carriage of SDID.

The International Union of Marine Insurance working group on container ship fire safety is now working on a draft of recommendations to the International Maritime Organization (IMO) in respect of improved fire detection and firefighting capabilities on board container ships. A group of shipping organizations has also made submissions to the IMO calling for a holistic approach to the issue, with a particular focus on risk prevention through more robust container inspection programs. In addition, a number of class societies have introduced guidelines for fire detection and fighting, as well as for the stowage of dangerous goods. 

“AGCS first raised the issue of container ship fires over five years ago. Now we are starting to see some traction. The IMO and class societies have taken up the issue of fire detection and firefighting, although the ongoing problem of mis-declared cargo is not so easily addressed because the problems are within the supply chains,” says Khanna.

In November 2020, the container ship One Apus lost almost 2,000 containers in rough seas in the Pacific, with hundreds more containers left damaged on board the vessel. The incident was the worst since 4,293 containers were lost with the sinking of the container ship MOL Comfort in 2013. In January 2021, the Maersk Essen lost about 750 boxes while sailing from China to Los Angeles. A month later, 260 containers fell off the Maersk Eindhoven when it lost power in heavy seas.

The number of container losses is the worst in seven years. More than 3,000 containers were lost at sea last year, while more than 1,000 fell overboard during the first months of 2021. This compares with an average of just 1,382 containers lost each year from around 6,000 container vessels in operation, according to a World Shipping Council [7] report in November 2020. The accidents are disrupting supply chains for retailers and manufacturers - from Amazon to Tesla.

The rise in container losses may be driven by a combination of potential factors. Larger ships, more extreme weather and a surge in freight rates and mis-declared cargo weights could all be at play, but there are also growing questions for how containers are secured on board ships. Of six cases of container losses in the North Pacific between November 2020 and March 2021 analyzed by AGCS (One Apus, Maersk Essen, Maersk Eindhoven, Ever Liberal, Tianping and MSC Aries) there were a number of common factors, according to Chopra.

“All container losses occurred in rough seas and when the vessels were on a westerly heading during the voyage from Asia to the US.

The loss of containers could be the result of a combination of various factors like synchronous and parametric rolling. But there may also be other issues at play, such as container stack collapse due to mis-declaration of cargo weights at a time when freight rates have been increasing,” says Chopra.

In 2018, the container ship CMA CGM G. Washington lost 137 containers overboard and a further 85 were damaged after the vessels unexpectedly pitched in heavy seas in the North Pacific while on passage from China to Los Angeles. The UK Marine Accident Investigation Branch [8] (MAIB) investigation into the incident said inaccurate container weight declarations and mis-stowed containers and loose lashings had contributed to the loss.

The MAIB recommended that cargo plans are updated to reflect container weights as weighed at the port, and that on board lashing software displays maximum pitch and roll angles for the vessel’s condition. It also noted that large container ships are particularly vulnerable to parametric rolling, where a ship experiences larger than expected roll behavior due to the position of wave crests and troughs.

“While there has been a large number of container losses in the North Pacific during the winter, this is a global problem. The size of vessels is the common thread, combined with the hydrodynamic forces exerted on containers and the way they are stowed and lashed. This is an issue that class societies urgently need to take up, and shed further light on what might be causing these losses,” says Kinsey. 

The grounding of the Stellar Banner follows a number of incidents involving VLOCs. In 2017, the Stellar Daisy sank in the South Atlantic with the loss of 22 crew. The accident investigation later concluded the vessel sank after listing caused by a catastrophic structural failure of the ship’s hull related to the vessel’s conversion from a very large crude carrier in 2008. The accident report said the strength of the ship’s structure had been compromised over time due to fatigue, corrosion, unidentified structural defects, multiport loading, and the forces imposed on the hull as a result of the weather conditions.

VLOCs can pose a higher than usual exposure due to the risks of cargo liquefaction, structural failings and the added challenge of salvage and wreck removal, according to Chopra.

“There have been a number of VLOC losses involving both converted and unconverted vessels. VLOCs experience higher hull forces (bending moments and shear forces) due to their sheer size and carriage of high-density cargoes. When high capacity shore cranes are used for loading these vessels careful planning, monitoring and execution is required to prevent overloading of the hull structures. Repeated deviations from the cargo loading plan can lead to structural fatigue in the long term and result in catastrophic consequences,” says Chopra.

Converted VLOCs like the Stellar Daisy are, however, on their way out, as newer and more reliable ships replace older converted vessels and as freight contracts expire. According to BIMCO [9] , three out of five converted VLOCs are no longer operating. Since June 2017, 43% of the VLOC fleet has been scrapped while 18% is idled or damaged. “Converted VLOCs are a red flag. Investigations into prior losses have found structural failings linked to the vessel’s conversion,” says Chopra.