Marine Insurance: Cargo Fires are a Burning Issue for Shipping

June 7, 2022

Copyright burnstuff2003/AdobeStock
Copyright burnstuff2003/AdobeStock

Commercial insurer Allianz Global Corporate & Specialty released its Safety & Shipping Review, an annual analysis of shipping losses and accidents worldwide.  The 2022 report reveals that the maritime sector continues its long-term positive safety trend over the past year with 54 total losses of vessels reported globally, compared with 65 a year earlier. This represents a 57% decline over 10 years (127 in 2012); while during the early 1990s the global fleet was losing 200+ vessels a year.

The 2021 loss total is made more impressive by the fact that there are an estimated 130,000 ships in the global fleet today, compared with some 80,000 30 years ago. Such progress reflects the increased focus on safety measures over time through training and safety programs, improved ship design, technology and regulation.

However, the industry is not without its challenges. Russia’s invasion of Ukraine, costly issues involving larger vessels, crew and port congestion and managing decarbonization targets, means there is no room for complacency.

Another growing challenge facing the shipping industry is fire on large vessels, which remains a key cause of major losses, requiring urgent action to improve vessel safety. A fire on board car carrier Felicity Age, beginning in February 2022, led to the vessel sinking in the Atlantic Ocean, along with its cargo of 4,000 vehicles. The incident occurred less than one year after a fire led to the sinking of the large container ship X-Press Pearl in May 2021 off Sri Lanka.

Catastrophic fires on large vessels typically begin with combustible cargo, which then spreads rapidly and outpaces the firefighting capabilities of the crew. The size and design of large vessels makes fire detection and fighting more challenging than traditional shipping, and once crew are forced to abandon ship, emergency response and salvage operations become more complex and expensive, and the risk of a major or total loss increases.

No let-up in container ship fire frequency

Fires on board large container ships are a top concern for marine insurers as a growing number of incidents continue to generate large losses. The Safety & Shipping Review analysis shows there have been over 70 reported fires on board container ships alone in the past five years, including incidents such as the Yantian Express (2019), and the Maersk Honam  (2018), which made headlines around the world. More recently, a fire broke out on board the large container ship Zim Kingston in October 2021 after a container of dangerous goods was damaged in a storm.

There have also been many near misses. In 2021, a container of flammable products caused a large fire and explosion at Dubai’s Jebel Ali port. Protection and indemnity insurer Gard estimates that there was at least one fire involving containerized cargo every two weeks in 2020.

Fires can take hold quickly and spread rapidly, yet container ship crews are relatively small in number, while detecting, locating and accessing a fire within a stack of containers is time-consuming. Fire-fighting equipment currently required under the International Convention for the Safety of Life at Sea (SOLAS) means crew face considerable risks when tackling a container fire, and are often unable to do so successfully.

Reducing the risk of fire on board large container ships will require a combination of regulatory action and industry initiatives, and there are encouraging signs that these are underway. Following proposals by insurers, ship owners’ associations and the flag states of Germany and Bahamas, the International Maritime Organization’s (IMO’s) Maritime Safety Committee agreed last year to amend SOLAS with the aim of enhancing fire detection and fighting capabilities on new container ships. Although the review was held up by Covid-19, the amendments are expected to enter into force on January 1, 2028.

However, with the regulatory changes some years away, the emphasis will be on the shipping industry to tackle the issue in the short term. We now have ships that are almost too large for the crew to fight fires effectively. There needs to be an urgent review of fire detection and fighting protections and equipment on board large container ships.

Cargo mis-declaration at heart of problem

Addressing a root cause for fires on board container ships is key to solving the problem.

A number of blazes at sea in recent years have been traced back to combustible or mis-declared cargos in containers, including batteries, charcoal and chemicals such as calcium hypochlorite, an ingredient in cleaning products.

In March 2022, the US Coast Guard (USCG) issued a safety alert about the risk posed by lithium batteries following two separate container fires caused by mis-declared cargo. The first, saw a shipping container waiting to be loaded onto a container ship bound for China catch fire. According to the USCG, the bills of lading indicated that the container was carrying ‘synthetic resins’ when, in fact, it held used lithium-ion batteries.

In a similar incident in August 2021, a container full of discarded lithium batteries caught fire while being transported by road to the Port of Virginia, where it was due to be loaded onto a container ship. The cargo was mis-declared as ‘computer parts’. These incidents would have been potentially “catastrophic” had the containers caught fire after being loaded aboard the container ships, the USCG said.

It is estimated that around 10% of all containers loaded on board ships contain declared dangerous cargo. However, around 5% of containers shipped consists of undeclared dangerous goods — either due to administrative error or being deliberately mis-declared. For example, this would equate to 1,000 teu or more of undeclared dangerous cargo on board a 24,000 teu ultra-large container vessel.

In 2019, the International Union of Marine Insurance (IUMI) and other stakeholders co-sponsored a submission to the International Maritime Organization (IMO) Sub Committee on Carriage of Cargoes and Containers proposing a comprehensive review of the International Maritime Dangerous Goods Code (IMDG Code), which defined and classified dangerous goods, as well as procedures for declaration. At present, some of those commodities are not considered dangerous and do not need to be declared as such by the shipper to the carrier.

Click Here to read the full Allianz Safety & Shipping Review 2022.

About the Author: Captain Rahul Khanna is Global Head of Marine Risk Consulting at Allianz Global Corporate & Specialty. A marine professional with 26 years of experience within the Shipping and Maritime industry, Captain Khanna served more than 14 years on board merchant ships in all ranks, including Master of large oil tankers trading worldwide.

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