• Safety
  and Shipping Review 2019: Asia Pacific waters remain top shipping loss region,
  led by South China, Indochina, Indonesia and Philippines
• While
  total losses have declined regionally, shipping incidents are on the rise as a
  result of high traffic
• Globally,
  46 large ships lost in 2018, down by a record 50% annually and 55% below the
  10-year-average of 104
• Challenges
  for shipping industry: political threats to vessel security; impact of 2020
  emissions rules and growing number of fire incidents

SINGAPORE�-�Media OutReach�- 4 June 2019 -�Asia
Pacific waters remain the top shipping loss region, accounting for 45% of
losses globally in 2018, according to Allianz Global Corporate & Specialty
SE's (AGCS) Safety & Shipping Review 2019. The
annual study analyzes reported shipping losses over 100 gross tons (GT).

In 2018, 21
total losses of vessels were reported in Asia Pacific, down from 46 losses in
the 12 months earlier, driven by a significant decline in activity in the global
loss hotspot, South East Asia, and weather-related losses after quieter
hurricane and typhoon seasons.

While this plummet in total losses
is encouraging, the
number of reported shipping incidents overall in Asia actually increased by 22%
in the past four years, according to analysis of data from 4,000 insured
vessels by AGCS[1].
However, this is more due to the sheer volume of ships that pass through the
region, rather than below-par safety standards.

"We do typically see more incidents
of groundings and collisions in Asia than other locations around the world, but
this generally reflects the higher levels of trade and where ship owners are
trading," says Tom Taberner, Regional Head
of Energy & Marine Asia Pacific at AGCS. "In many cases port
infrastructure in Asia is new and there are many new or expanding ports in
China, Korea, Japan and Malaysia etc. Newer infrastructure means fewer issues,
better port operations and more up-to-date charts, which will address
challenges."

Worst accident locations and common causes of loss

Asia Pacific waters remain a
hotspot for marine claims with 4 of the top 10 loss regions globally in 2018
and half of the top 10 largest losses also occurring in the region. The South
China, Indochina, Indonesia and Philippines maritime region remains the top
loss region, where one in four losses globally occurred in 2018 (12). This is
however significantly down from 29 a year earlier, marking the first time the
region has seen a fall in losses in four years. Other top loss regions in Asia
Pacific include Japan, Korea and North China (#4 globally), as well as the
Arabian Gulf and approaches (#5).

Cargo
ships (8) accounted for more than a third of vessels lost around Asia
Pacific in the past year. Foundered (sunk/submerged) was the major cause,
accounting for 14 of the 21 losses regionally -- over thrice as many as the next
highest cause -- wrecked/stranded. Global results also bear this trend, where foundering
(sinking), has accounted for over half (551) of the 1,036 lost globally over
the past decade, and are the most expensive cause of loss for insurers, accounting
for US $1.56bn in five years[2].

Despite a decline in number of total losses, the
frequency and cost of collision, grounding and fire incidents has increased in
some locations for Asian based-ship owners and managers. There were 425
collisions or contact incidents during the past 12 months, with the average
cost of collision claims highest on containers vessels ($840,000). Overall,
collision incidents are the second most frequent cause of claims in the region
behind machinery breakdown / engine damage (462 incidents).

Fires also continue to be an issue with 34 reported
incidents over four years, at a total cost to the region's insurance sector of
almost $50m ($48mn). In particular, there has been an increase in cargo fires
on container ships and car carriers, with a number of notable losses in 2018
and 2019. "We have seen a rise in incidents involving car carriers, which are
becoming more expensive. This is a major concern with fires on the Auto
Banner in May 2018 and most recently the Sincerity Ace in
January 2019," says Taberner.

Piracy numbers in the region have
also fallen, led by Indonesia which saw a 64% fall of piracy incidents (36) in
2018 over the past five years, and is no longer the top piracy hotspot in the
world. However, the South East Asia and Africa regions still account for over
three quarters of all piracy incidents worldwide (77% - South East Asia 67
incidents and Africa 87 incidents). Hijacking and boarding of vessels is still
tied to inequality and the economic situation in parts of Africa and Asia,
meaning global economic and geopolitical continue to play on the security of
shipping.

Global trends and evolving compliance and security challenges

Globally, the loss trends are
similar to Asia, with 46 large ships lost worldwide in 2018, down from 98 12
months earlier. However, the number of reported shipping incidents overall
(2,698 in 2018) shows little decline, less than 1% year-on-year. Just like
Asia, machinery damage is a major cause, accounting for more than a third of
the 26,000+ incidents over the past decade, and is one of the most expensive
causes of marine insurance claims ($1bn+ in five years2).

Looking forward, regulation
limiting sulphur oxide emissions from January 2020 is likely to be a game-
changer for the shipping industry, with wide-ranging implications for cost,
compliance and crew. In addition, political
risk has also heightened globally and increasingly poses a threat to
shipping security, trade and supply chains through conflicts, territorial
disputes, cyber-attacks, sanctions, piracy and even sabotage, as evidenced by
recent attacks on oil tankers in the Middle East. Growing numbers of migrants
at sea and an increase in stowaways on commercial vessels also has serious
consequences for ship owners, leading to delays, diversions and pressure on
crew. In contrast to Asia, piracy incidents increased in 2018 to more than 200 --
Nigeria is now the top global hotspot.

Other risk topics in the AGCS Safety
And Shipping Review include:

• The
  growing number of incidents on larger vessels is concerning.
  Container-carrying capacity has almost doubled over a decade and a worst case
  loss scenario could cost as much as US $4bn in future.
• Trusting
  technology: Safety-enhancing technology in shipping has been a positive for
  safety and claims, yet accidents continue to happen due to overreliance -- even
  down to losses occurring from crew being on phones.
• Autonomous
  shipping makes waves: Progress continues to be made but technology is not a
  panacea if the root cause of incidents and losses is not addressed.
• Cyber
  threats increase and evolve -- With cyber losses set to become more
  prominent, companies are focusing more on cyber security assessments while some
  insurers are looking to clarify "silent" exposures. However, more contingency
  planning and stress testing of systems needs to be done to combat the growing
  number of loss scenarios, while new services could also help.

AGCS provides global marine and
shipping insurance for all types of marine risk, from single vessels and
shipments to the most complex fleets and multinational logistics businesses. The
Marine
Line of Business contributed 11% to AGCS overall premium volume of EUR� 8.2bn in 2018.�

About Allianz Global Corporate & Specialty

Allianz Global Corporate & Specialty (AGCS) is a leading global
corporate insurance carrier and a key business unit of Allianz Group. We
provide risk consultancy, Property-Casualty insurance solutions and alternative
risk transfer for a wide spectrum of commercial, corporate and specialty risks
across 12 dedicated lines of business.

Our customers are as diverse
as business can be, ranging from Fortune Global 500 companies to small
businesses, and private individuals. Among them are not only the world's largest
consumer brands, tech companies and the global aviation and shipping industry,
but also wineries, satellite operators or Hollywood film productions. They all
look to AGCS for smart answers to their largest and most complex risks in a
dynamic, multinational business environment and trust us to deliver an
outstanding claims experience.

Worldwide, AGCS operates with
its own teams in 34 countries and through the Allianz Group network and
partners in over 200 countries and territories, employing over 4,400 people. As
one of the largest Property-Casualty units of Allianz Group, we are backed by
strong and stable financial ratings. In 2018, AGCS generated a total of �8.2
billion gross premium globally.

For more information please visit http://www.agcs.allianz.com/
or follow us on Twitter @AGCS_Insurance and LinkedIn.

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