Large shipping losses have halved in the past decade, but a “perfect storm” of regulatory pressure, narrow margins and new risks is gathering, according to Allianz Global Corporate & Specialty’s (AGCS) fifth annual shipping review.

Last year, total losses of shipping fell 16% to 85 incidents, compared with 101 in 2015. The number of losses above 100 gross tons declined 4% to 2611.

The most common cause was sinking in bad weather, while machinery damage caused more than one-third of shipping incidents.

AGCS Global Product Leader Hull and Marine Liabilities Baptiste Ossena says while the long-term downward loss trend is positive, the shipping sector is being “buffeted by a number of interconnected risks at a time of inherent economic challenges”.

Threats include greater environmental scrutiny, with record fines for pollution, costly new ballast water management rules and increased political risks in hotspots such as Yemen and the South China Sea affecting vessel routes.

The threat of offshore cyber attacks is significant, but since no major incident has occurred, the industry remains complacent.

Rising bankruptcies and high debt levels are causing some ship owners to cut maintenance budgets, crew numbers and training, which can increase loss activity.

AGCS says negligence and poor maintenance are leading causes of liability loss in shipping, and it has noticed an increase in claims involving the latter.

Safety-enhancing technology such as electronic navigation tools and shore-based machinery monitoring is helping to eliminate human error, but users need to understand its limitations.

AGCS and other insurers are in the early stages of working with ship owners to utilise voyage data recorder analysis.

Other risks identified in the review include structural integrity of vessels, autonomous shipping, fires at sea and the potential for $4 billion-plus clean-ups if larger vessels are wrecked.