Quantification and Analysis of Risk Exposure in the Maritime Industry: Averted Incident Costs Due to Inspections and the Effect of SARS-Cov-2 (COVID-19)

Abstract

Shipping provides essential services even during global pandemics such as SARS-CoV-2 (COVID-19). The present approach estimates the monetary value at risk (MVR) at the global and regional level for the world fleet and quantifies the amount of averted incident costs due to inspections. It also provides an indication of the effect of COVID-19 on both. This information can help maritime stakeholders to better understand their risk exposure and improve mitigation strategies. The analysis is based on the global fleet, using a comprehensive combination of data. 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 were slightly higher than global insurance premiums with USD 13.7 to 17.8 billion. Over half of the MVR was due to other marine liabilities and hull and machinery, with cruise vessels leading to loss of life and injuries and oil tankers leading to pollution. The top 25 flags accounted for 87.9% of MVR with open registries in the lead. In terms of value of MVR per GRT, traditional flags, Non-IACS flags and owners located in low to upper middle-income countries, showed 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 as compared to 2019. Averted yearly incident costs were 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.