Hazardous and combustible goods are increasingly transported by containers, while the prevalence of Lithium-ion (Li-ion) batteries poses a growing risk for both container shipping and car carrier vessels. At the same time, these hazardous cargos are increasingly transported by large vessels, where the consequences of fires are amplified, resulting in more severe losses and longer delays. 

“Decarbonization is leading to new types of cargo, some more hazardous than in the past, such as electric scooters and battery-powered goods,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at Allianz Global Corporate & Specialty (AGCS).

“A lot of conventional power sources have been replaced by batteries, and that industry has seen huge increases in demand in recent years, a trend that will only continue. These new cargos mean new risks,” says Khanna.

Fire is one of the the biggest causes of general average claims on container vessels, and one of the main causes of total losses across all vessel types with 64 ships lost in the past five years alone. With upwards of 20,000 containers on board some vessels, the risk of a fire originating from a container increase, while detecting and fighting a fire at sea is particularly difficult for a crew of just 20 to 30 people, according to Marcel Ackermann, Global Project Leader Cargo at AGCS. A small container fire can easily take hold and overwhelm the ability of crew to deal with the situation, leading to the abandonment of the vessel, and potentially its loss.

Recent incidents include the ZIM Charleston fire in August 2022, in which some 300 containers were reportedly damaged. [1] This was followed by the TSS Pearl in the Red Sea in October 2022, [2] which sank after the crew were forced to abandon ship. There have also been several fires at ports and warehouses, including the 2022 fire and explosion [3] at a container depot in Chittagong, Bangladesh, which killed 40 people. 

“General average has a significant impact on cargo customers because if it occurs, the time it takes to release cargo is exponentially longer on a large container vessel, which has implications for supply chains and seasonal cargo,” says Ackermann.

“When we look at significant general average incidents involving container vessels over the past five years, they are largely related to fires. General average risk these days comes down to fire, and the majority of these incidents are related to mis-declaration of cargo.”

In recent years the role that mis-declared dangerous goods, such as chemicals, batteries and charcoal, have played in cargo fires has become increasingly documented. Failure to properly declare, document and pack such hazardous cargo can result in containers stowed inappropriately, or hamper firefighting efforts. Labeling a cargo as dangerous is more expensive and therefore some companies try to circumvent this by labeling items such as fireworks as toys or lithium-ion batteries as computer parts for example. 

Meanwhile, the Cargo Incident Notification System (CINS) [4] says nearly 25% of all serious incidents onboard container ships are attributable to mis-declared cargo. In 2020, a US National Cargo Bureau (NCB) survey [5] focusing on 500 containers showed that more than half failed with one or more deficiencies, 69% of the import containers contained dangerous goods and 38% of the export ones. Of the import containers with dangerous goods, 44% had problems with the way cargo was secured, 39% had improper placarding and 8% had mis-declared cargo. Of the export containers with dangerous goods, 25% had securing issues, 15% were improperly placarded and 5% were mis‑declared. 

A number of large container shipping companies have turned to technology to address mis-declared cargo, using cargo screening software – like the US National Cargo Bureau’s Hazcheck Detect [6] tool – to detect suspicious bookings and cargo details. Several large container operators are now imposing penalties on mis-declared dangerous goods. 

“Mis-declared cargo is an important factor in many container fires, but no real holistic solution to this problem is in sight. Currently, each shipping company and jurisdiction has its own requirements while the rate of container inspections in many countries is low,” says Marcel Ackermann, Global Product Leader Cargo at AGCS. 

“The challenge is how to regulate a global industry in which millions of diversified containers are transported every year. What we would really like to see is unified requirements for mis-declared hazardous cargo on all shippers and fines for those that mis-declare hazardous cargo,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS.

Fires in EVs with Li-ion batteries can burn more ferociously, are very difficult to extinguish, and are capable of spontaneously reigniting hours or even days after they have been put out. Most ships lack the suitable fire protection, firefighting capabilities, and detection systems to tackle such fires at sea, which has been made more difficult by the dramatic increase in ship size.

“Li-ion batteries on their own are not new, and the risks are well documented,” says Captain Randall Lund, Senior Marine Risk Consultant at Allianz Global Corporate & Specialty (AGCS). “But the explosion of demand for these batteries is flooding the market with new manufacturers, raising questions around quality control. We have seen many fires where the cause has been traced to malfunctioning or damaged batteries.”

Li-ion fire risks will likely ease over time as manufacturers, carriers, and regulators address the current challenges. In the meantime, attention must be focused on pre-emptive measures to help mitigate the peril. Measures to consider include ensuring staff/crew receive adequate training and access to appropriate firefighting equipment, improving early detection systems and developing hazard control and emergency plans. 

“The debate about electric vehicles in the shipping industry is ongoing, with conversations about whether there is a need for dedicated Ro-ro vessels for EVs. From an insurance perspective, this is something we would like to see – purpose built vessels for transporting electric vehicles, designed to substantially reduce the risk of fire,” says Captain Rahul Khanna, Global Head of Marine Risk Consulting at AGCS. 

When it comes to concrete actions to mitigate battery fire risk in containers and on Ro-Ros, there is no clear universal solution as yet, says Justus Heinrich, Global Product Leader Marine Hull at AGCS: “If this risk is not properly mitigated, insurers will have to address it through portfolio risk management and insurance capacity steering.”

In January 2023, a 375-ton column broke free and fell off the deck of a bulk carrier into the Adriatic Sea near Italy. Both the shipping company and the vessel were not specialist project cargo carriers. This is not the only such incident seen by insurers in recent years. 

Critical project cargo is typically high value, with long lead times, explains Captain Rahul Khanna, Global Head of Marine Risk Consulting at Allianz Global Corporate & Specialty (AGCS): “Values can range from under $1mn to tens of millions of dollars, but delay in start-up claims can be many times the value of the cargo. A damaged turbine could take 12 to 18 months to replace, for example.” 

The project cargo market has seen increased activity since the Covid-19 pandemic, with growing demand from increasing investment in infrastructure development and the decarbonization of industries. However, handling critical cargo requires specialist vessels, equipment, and port infrastructure. Being heavy and cumbersome, it also relies on skilled personnel and robust procedures to load and transport project cargo safely. 

“The specialist skills and vessels required to transport project cargo are in high demand as the number of such items has increased since the pandemic. But there is concern in the insurance industry that the specialist skills required to load and transport project cargo are slowly eroding,” says Khanna. 

“We are experiencing an increase in losses, and we need to see a tightening up of processes and procedures. Ships and crews and levels of training should be of the highest level when handling critical cargo. It is important they are not carried on non-specialist ships with crews that are not trained for heavy lift vessels.

“Many of the losses are caused by a poor understanding of procedures to load and stow project cargo. Damage typically happens due to usage of inadequate lifting equipment or poor cargo securing arrangements. It is therefore imperative that experienced personnel are in charge of such operations and marine warranty surveyors are appointed,” says Khanna.