The Changing Face of International Shipping

For some time now autonomous ships have been championed as the future of container shipping. So how close are we and what effects may it have on insurance claims? Whether part autonomous with crew members performing key duties on board still, or fully autonomous with land-based captains, changes are happening as you read this says Reason Global’s Malcolm Pearson.

New ship designs are already being created, based on the need for no crew quarters or traditional bridge, meaning designers are looking at how to increase container capacity with the new-found space. Remote sailors based on shore will potentially operate numerous vessels in a work structure much more associated with air traffic controllers. Shifts will be shorter, employees will go home at night and see their families, and this in itself could encourage more women in to the industry, surely a good thing. It is estimated in current shipping statistics that 75% of accidents at sea are caused by human error and so the potential effect on insurance claims and delays could be significant.

However, shipping has always seen problems with piracy and a new type of sailor will also mean a new type of pirate. Now more likely to be sitting in pyjamas with a laptop than brandishing a machine gun, the industry is already seeing a new wave of technology pirates attempting to take control of ships systems and secure ransoms as a result. If you think all Somalian pirates are wielding AK-47’s then think again; some are more likely already focused on spoofing emails than shooting sailors.

Cyber attacks will increase and will become a commercial and insurance issue. In terms of vessels being judged as seaworthy with no crew, relevant legal systems will have to learn and adapt.

The modern bridge on a ship already contains numerous cyber gateways and current pirate tactics have already seen computer systems taken over and held hostage to ransomware, with payments demanded to release control back. And these systems’ fallibilities are being used to take control and sail ships to grounding or collision to then allow traditional boarding and ransacking.

Cases already seen include IRSL 2011 where pirates damaged all data on cargo and communications networks. In February 2017, pirates took control of IT systems on a container ship for 10 hours. IT support managed to wrestle control back without any major damage done. However, that is not always the case.

Maersk underwent a high-profile attack and were generally commended for making the matter public and embracing the issue, using social media for effective and honest communication. However, this did not stop an estimated $300m of lost revenue and the need for 45,000 new computers and servers across the business.

From an insurance perspective, these scenarios all have different and complex elements and the industry is examining how to best react and plan. The Institute Cyber Attack Exclusion Clause – CL.380 – is incorporated into many marine insurance contracts and is currently accepted as the market clause for this issue. Drafted in 2003, long before many of leading technologies were so widely adapted, it now potentially needs revisiting in the changing world we are seeing.

In short, the effects can be devastating and widespread but that is not stopping the shipping lines pushing for autonomous ships and those massively reduced error counts. One thing is for sure and that is that the pace of change in international shipping shows no signs of slowing and everyone associated will need to adapt with it.

Article as featured in the September issue of FIDI Focus Magazine.

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Contact – Reason Global, Marine & Cyber Risk