Quantification and analysis of risk exposure in the maritime industry

Shipping facilitates global trade and provides essential services even during global pandemics such as SARS-CoV-2 (Covid19). An improved understanding of the magnitude and change of risk exposure has become more important for all maritime stake holders. The present approach quantifies global and regional risk exposure at ship level expressed as the monetary value at risk (MVR) and measures the amount of averted or mitigated incident costs due to inspections which can maritime stakeholders better understand risk exposure and develop strategies and policies to mitigate risk with improved risk control options such as improved risk profiling. The analysis is based on the global fleet using many data sources including ship particulars, inspections, incidents, cargo values, secondhand prices of vessels, special drawing right limits, arrival data and traffic movement data of 133,799 unique IMO. Estimation scenarios are run for the years 2017 to 2020 resulting in millions of computations as risk components are estimated at the individual ship level. The analysis confirms the importance to estimate all components at ship level as safety qualities differ and each vessel benefits differently from an inspection. Estimates of MVR (TLVSS, total loss, very serious and serious incidents) are slightly higher than global insurance premiums and global MVR stands at 13.7 to 17.8 billion USD. Over half of risk exposure is due to other marine liabilities and hull and machinery with cruise vessels leading loss of life and injuries and oil tankers pollution. The top 25 flags account for 87.9% of MVR with open registries in the lead reflecting the structure of the world fleet. In terms of MVR per GRT value, traditional flags, Non-IACS flags and owners located in low to upper middle-income countries show the highest values. Total MVR decreased by 4.18% due to the effects of the pandemic but pollution risk exposure increased by 6% in 2020 compared to 2019. Averted yearly incident costs are estimated to be 25% to 40% of global MVR which highlights the importance of port state control inspection programs but as inspection coverage decreased, this translated into a reduction of 6 to 11% of averted incident costs due to inspections in 2020 due to the pandemic.