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‘Mega ships’ could lead to $US2 billion losses

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Massive cargo ships could result in $US2 billion ($2.55 billion) loss scenarios, according to Allianz Global Corporate & Specialty (AGCS).

In its third annual Safety and Shipping Review, the global insurer notes the arrival of 19,000-teu container vessels has led cargo carrying capacity to increase 1200% in the past 50 years.

These “mega ships” bring increased risk as cargo values rise and salvage becomes increasingly complex, and a collision between two such vessels could lead to losses of $US2 billion plus.

“We have already seen a passenger ship case [Costa Concordia] where the final loss figure is about $US2 billion,” AGCS Global Head of Marine Risk Consulting Rahul Khanna said.

“This is mainly due to the cost of wreck removal, and if an equivalent wreck removal process is used in the case of two 19,000-teu vessels, then cost could exceed $US2 billion.”

With 22,000-teu ships potentially just three years away, the industry needs to think hard about how big is too big, the report says.

It also highlights cyber attacks as a major threat to the industry.

“Crews becoming smaller, ships becoming larger, and a growing reliance on automation all significantly exacerbate the risks from hackers disrupting key systems.”

The report found last year’s loss of 75 large ships was down 32% compared with 2013, making it the safest year in a decade.

Shipping losses have declined 50% since 2005.

However, last year was marred by the loss of more than 300 lives in the sinking of the South Korean ferry Sewol in April.

The report says piracy attacks were down 7%, the fourth successive reduction, thanks to improvements in tackling the threat in Somalia and the Gulf of Guinea.

However, attacks were up in southeast Asia, while Bangladesh has emerged as a new hotspot.