This article is part of the
Safety and Shipping Review 2023
Cargo fire risks continue to rise
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.Őż
‚ÄúDecarbonization is leading to new types of¬†cargo, some more hazardous than in the past,¬†such as electric scooters and battery-powered¬†goods,‚ÄĚ says Captain Rahul Khanna, Global¬†Head of Marine Risk Consulting at 91Ő∆≤ģĽĘ¬†Global Corporate & Specialty (AGCS).
‚ÄúA 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,‚ÄĚ 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. ¬†This was followed¬†by the TSS Pearl in the Red Sea in October¬†2022, ¬†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  at a container depot in¬†Chittagong, Bangladesh, which killed 40 people.Őż
‚ÄúGeneral 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,‚ÄĚŐż≤ű≤Ļ≤‚≤ű Ackermann.
‚ÄúWhen we look at significant general average¬†incidents involving container vessels over the¬†past five years, they are largely related to fires.ŐżGeneral average risk these days comes down¬†to fire, and the majority of these incidents are¬†related to mis-declaration of cargo.‚ÄĚ
What is general average?
Addressing the root cause of fires - mis-declared 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.Őż
Meanwhile, the Cargo Incident Notification¬†System (CINS)  says nearly 25% of all¬†serious incidents onboard container ships are¬†attributable to mis-declared cargo.ŐżIn 2020, a US National Cargo Bureau (NCB)¬†survey  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‚ÄĎdeclared.Őż
A number of large container shipping companies¬†have turned to technology to address mis-declared cargo, using cargo screening software¬†‚Äď like the US National Cargo Bureau‚Äôs Hazcheck¬†Detect  tool ‚Äď to detect suspicious bookings and¬†cargo details. Several large container operators¬†are now imposing penalties on mis-declared¬†dangerous goods.Őż
‚ÄúMis-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,‚ÄĚ ≤ű≤Ļ≤‚≤űŐżMarcel Ackermann, Global Product Leader Cargo at AGCS.Őż
‚ÄúThe 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,‚ÄĚŐż≤ű≤Ļ≤‚≤ű Captain Rahul Khanna, Global Head of¬†Marine Risk Consulting at AGCS.
Addressing the risks from¬†Li-ion batteries
Decarbonization and electrification are¬†increasing the number of shipping goods that¬†contain Li-ion batteries, from electric vehicles to¬†a wide range of consumer and electronic goods.ŐżThe global Li-ion battery market is expected to¬†grow by over 30% annually from 2022 to 2030,¬†according to McKinsey.  The number of electric¬†vehicles (EVs) is also growing at a fast pace:¬†Nearly 10%  of global car sales were electric in¬†2021, four times the market share in 2019.Őż
The main hazards of Li-ion batteries are fire,¬†explosion, and ‚Äėthermal runaway‚Äô, a rapid¬†self-heating fire that can cause an explosion.ŐżThey can also produce irritating, corrosive or¬†poisonous gases that cause an explosion in a¬†confined space. The main causes of Li-ion fires¬†are substandard manufacturing or damaged¬†battery cells or devices, over-charging, and¬†short circuiting.
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.
‚ÄúLi-ion batteries on their own are not new, and¬†the risks are well documented,‚ÄĚ says Captain Randall¬†Lund, Senior Marine Risk Consultant at 91Ő∆≤ģĽĘ¬†Global Corporate & Specialty (AGCS). ‚ÄúBut¬†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.‚ÄĚ
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.Őż
‚ÄúThe 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 ‚Äď purpose built vessels for transporting¬†electric vehicles, designed to substantially¬†reduce the risk of fire,‚ÄĚ says Captain Rahul¬†Khanna, Global Head of Marine Risk¬†Consulting at AGCS.Őż
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,Őż≤ű≤Ļ≤‚≤ű Justus Heinrich, Global Product Leader¬†Marine Hull at AGCS: ‚ÄúIf this risk is not properly¬†mitigated, insurers will have to address it¬†through portfolio risk management and¬†insurance capacity steering.‚ÄĚ
Making progress on¬†container ship fire safety
For almost a decade About usGlobal Corporate &¬†Specialty (AGCS) and others in the insurance industry¬†have called for enhanced fire detection and fighting¬†systems for container ships. In 2017, the International¬†Union of Marine Insurance (IUMI) co-sponsored a¬†submission to the International Maritime Organization¬†(IMO) Maritime Safety Committee with a view to¬†amending The International Convention for the¬†Safety of Life at Sea (SOLAS) to enhance provisions¬†for early fire detection and effective control of fires in¬†containerized cargos. Although delayed by Covid-19,¬†the process to amend SOLAS is underway.Őż
In March 2023, the European Maritime Safety Agency¬†published its CARGOSAFE study,  which assesses¬†the risks associated with fires on container ships and¬†evaluates prevention, detection, firefighting, and¬†containment measures. The IMO is to review the study,¬†alongside other industry and insurer proposals to¬†improve the firefighting capability for the cargo deck¬†area of container ships. The amendments to SOLAS,¬†which apply to new ships, are expected to enter into¬†force on January 1, 2028.Őż
In addition to the IMO work, the private sector has¬†been developing technical solutions to the problem,¬†such as using sensors and thermal imaging to detect¬†fires early. In another positive development, a group¬†of leading shipping companies  launched the Cargo¬†Fire & Loss Innovation Initiative, which aims to reduce¬†the impact of cargo fires and cargo loss through joint¬†requirements, technology solutions, and best practices¬†and recommendations.Őż
‚ÄúWe are seeing innovation in the private sector to¬†address the issue of fires on container ships, and inside¬†containers, which makes us optimistic that realization¬†of the problem has increased. This is no longer about¬†raising awareness but moving to concrete measures¬†through investment in fire detection and protection for¬†existing vessels, in combination with discussions at IMO¬†level on new ship design,‚ÄĚ says Captain Rahul Khanna,¬†Global Head of Marine Risk Consulting at AGCS.
New regulations will require operators to keep track of shipping containers lost at sea, which pose a threat to navigation and the environment.
In March, 2023, an MSC container ship  lost¬†46 empty shipping containers at three different¬†times during bad weather east of Bermuda.ŐżThe incident followed one of the worst periods¬†on record for container losses. According to the World Shipping Council  (WSC), over¬†3,100 containers were lost for the two-year¬†period 2020-2021, more than four times the 779¬†reported in the previous period.Őż
Last year, the International Maritime¬†Organization (IMO) agreed proposals for¬†the mandatory reporting of lost containers.ŐżThe draft amendments to the International¬†Convention for the Safety of Life at Sea (SOLAS)¬†and the International Convention for the¬†Prevention of Pollution from Ships (MARPOL)¬†treaties will require vessels to report the loss of¬†freight containers without delay to ships in the¬†vicinity, and to the nearest coastal state and flag¬†state. The draft amendments are expected to¬†enter into force on January 1, 2026.Őż‚ÄúShipowners will be required to trace container¬†losses at sea in order to recover them. It is no¬†longer acceptable that a vessel can easily lose¬†containers which are a danger to navigation¬†and a threat to the environment,‚ÄĚ says R√©gis¬†Broudin, Global Head of Marine Claims at¬†About usGlobal Corporate & Specialty.Őż
‚ÄúThere were fewer incidents in 2022, but this¬†remains an important issue for the container¬†industry, in particular large container ships,¬†where the size of vessels may be a factor in the¬†loss of containers in heavy seas,‚ÄĚ says Broudin.ŐżLarge container vessels, where containers can¬†be stacked as many as 26 deep, are vulnerable¬†to parametric rolling (extreme rolling and¬†pitching) in certain sea conditions, exerting¬†extreme stresses on container stacks and their¬†securing systems.Őż
‚ÄúWe cannot stop stronger weather conditions¬†at sea. But we can address the risk of human¬†error with storage and lashing of containers,‚ÄĚŐż≤ű≤Ļ≤‚≤ű Broudin.
Erosion of specialist skills¬†leads to project cargo losses
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.Őż
Critical project cargo is typically high value,¬†with long lead times, explains Captain¬†Rahul Khanna, Global Head of Marine Risk¬†Consulting at About usGlobal Corporate &¬†Specialty (AGCS): ‚ÄúValues 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.‚ÄĚ¬†
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.ŐżBeing heavy and cumbersome, it also relies on¬†skilled personnel and robust procedures to load¬†and transport project cargo safely.Őż
‚ÄúThe 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,‚ÄĚŐż≤ű≤Ļ≤‚≤ű Khanna.Őż
‚ÄúWe 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.
‚ÄúMany 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,‚ÄĚ says Khanna.
 Port Technology, General Average declared¬†following ZIM Charleston cargo fire, August 23,¬†2022
¬†The Loadstar, Blaze-hit TSS Pearl sinks in Red¬†Sea after crew abandon ship, October 13, 2022
 Port Technology, Chittagong supply chain¬†feeling aftershocks of container depot fire, June¬†27, 2022
 Splash 247.com, Hapag-Lloyd to fine shippers¬†$15,000 per box for any misdeclared hazardous¬†cargos, August 7, 2019
 National Cargo Bureau, Container inspection¬†safety initiative white paper, July 2022
 National Cargo Bureau, Hapag-Lloyd adopt¬†Hazcheck Detect cargo screening tool for¬†misdeclared and undeclared dangerous goods,¬†January 5, 2022
 McKinsey & Company, Battery 2030: Resilient,¬†sustainable and circular, January 16, 2023
 International Energy Agency, Global EV outlook¬†2022
 European Maritime Safety Agency, CARGOSAFE¬†study, March 16, 2023
 Safetytech Accelerator, Major shipping carriers¬†unite to improve safety of cargo, February 22,¬†2023
 gCaptain, MSC container ship loses empty¬†containers overboard off Bermuda, March 8,¬†2023
¬†World Shipping Council, Containers lost at sea¬†report 2022 update published, June 22, 2022
Annual survey identifying business risks
About usRisk Barometer
Top 3 business risks in Marine and Shipping in 2023
- Fire, explosion (29%) -¬†2022 rank: 3 (25%)
- Changes in legislation and regulation (25%) - NEW
- Cyber incidents (25%) -¬†2022 rank: 4 (23%)
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