Coronavirus: Challenges for the shipping sector

The coronavirus outbreak has led to unprecedented measures being taken by governments which are impacting businesses across the world.  The international shipping industry, which is responsible for around 90% of world trade, is no exception and has also been severely affected, resulting in a number of pressing issues for mariners which could result in an uptick in loss activity if not adequately managed.

“The increasing disruption and economic pressures caused by the pandemic also has serious risk management implications for the maritime community and insurers alike,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS. “If regular vessel maintenance is not carried out in lay-up, problems can materialize when the ship is ready to sail again. Relieving crew has become more challenging due to travel restrictions, meaning more fatigued seafarers; one of the main causes of human error onboard. Delays in the servicing and inspections of vessels and emergency equipment can result in any problems remaining undetected, while supply chain disruption means spares, oils and fuel  and lubricating oils can take longer to arrive, which can result in machinery damage if incorrect alternatives are used.”

Although ships remain active through the coronavirus outbreak, many vessels have been impacted, leading to a number lying idle. A vessel is considered to be on lay-up when it is taken out of service and is anchored at a fixed location for a considerable period of time without undertaking any commercial activities.  In a so-called warm lay-up, vessels still have crew onboard and can be ready to return to sailing relatively quickly. In a cold lay-up, a skeleton crew is retained for tasks such as maintenance, but most systems are shut down. Reactivating the vessel can take time, requiring extensive testing to ensure it is safe, and can be expensive, costing up to millions of dollars in worst cases.

Increasing number of vessels being laid-up in the same location can create accumulation exposure and have the potential to cause multiple losses from a single catastrophic event. The availability of tugs and support vessels may not be adequate to respond to a contingency involving several vessels. A considerable number of large cruise vessels are reported to have been temporarily laid up around the US East coast, as the industry has ground to a halt. The onset of the hurricane season in the North Atlantic creates imminent risks to these vessels, and a multi-billion dollar exposure for underwriters. Ship-owners should ensure the vessels are ready to move out of harm’s way in case of an approaching hurricane.

Comprehensive plans including risk assessments covering storage and lay-up are crucial for ensuring the safety of vessel during the downtime and its subsequent return to service. An unplanned lay-up can result in a prolonged recommissioning exercise that can last for months, even requiring docking.

Ship-owners are encouraged to use guidance documents and checklists provided by classification societies when preparing this plan. The lay-up plan should present a clear picture in terms of risks specific to the location and the type of vessel, including swells, tropical storms, traffic lanes and seabed and any local phenomenon; mooring arrangements ; preservation and maintenance of main machinery and nautical equipment ; fire-fighting arrangements; tug availability in a contingency; and hull integrity.

Travel restrictions due to the coronavirus pandemic has made it difficult to effect crew-change on vessels. Due to border closures there are limited options for repatriation and in many cases crews have continued working on board for months longer than usual. Longer tours of duty, coupled with concern for families at home, can cause physical and mental fatigue among seafarers. It is estimated that 75% to 96% of marine incidents can involve human error and fatigue is one of the major underlying causes.

“Adjustments in work and rest hours offers effective fatigue management,” says Captain Nitin Chopra, Senior Marine Risk Consultant at AGCS.  “Hiring from a pool of locally-available seafarers may be an option in some cases.”

Classification societies are facing difficulties in arranging attendance for scheduled surveys, which is affecting the validity of classification and statutory certification of vessels. The servicing of critical equipment may not take place at the scheduled interval as engineers are unable to attend. Shortage of workforce and implementation of social distancing measures in shipyards is causing delays.

It is anticipated that the number of port state control inspections will reduce owing to the restrictions in place and this may lead to unsafe practices and conditions on board going undetected.

“Risks arising from delays in the servicing of emergency equipment (e.g. fire-fighting appliances) will require implementation of additional control measures,” says Chopra. “Routine jobs involving risk of fire can be delayed in the interest of safety. Exercise caution if using navigational equipment beyond prescribed service intervals.”

Other challenges for the shipping industry highlighted in the report include:

• Supply chain disruption means oils and fuel can take longer to arrive, which can result in machinery damage if incorrect alternatives are used.
• An increase in the use of remote pilots – to protect seafarers from the risk of infection - can also bring an enhanced risk to the safe navigation of the vessel.
• With courier services restricted in many regions it may not be possible to dispatch fuel oil samples for analysis to shore-based laboratories. This may lead to consumption of bunkers without proper analysis, increasing the risk of machinery damage.