The effectiveness of safety inspections has been analysed from various angles, but until now, relatively little attention has been given to translate risk reduction into incident cost savings. This paper quantifies estimated cost savings based on port state control inspections and industry vetting inspections. It is based on a unique dataset of 515,194 ship arrivals and inspections from the United States of America and Australia, and inspections of three industry vetting inspection regimes, for the time period 2002 to 2007. The risk reducing effect of inspections is estimated by means of duration models, in terms of inspection gains based on the probability of survival. The results suggest average total estimated cost savings in the range of USD 74 to 192 thousand (median USD 19 to 46 thousand) owing to reduced risk of total loss due to a port state control inspection. Cost savings for industry inspections are found to be even higher, especially for tankers. The savings vary by type, age and size of the ship. The benefits of an inspection are in general larger for older and larger vessels, and also for vessels with undefined flags and unknown classification societies. As inspection costs are relatively low in comparison to potential cost savings, the results underline the importance in determining high risk ships to prevent costs due to total loss of ships.

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Erasmus School of Economics
Econometric Institute Research Papers
Report / Econometric Institute, Erasmus University Rotterdam
Erasmus School of Economics

Knapp, S., Bijwaard, G., & Heij, C. (2010). Estimated Incident Cost Savings in Shipping Due to Inspections (No. EI 2010-28). Report / Econometric Institute, Erasmus University Rotterdam (pp. 1–25). Retrieved from