Fishing is an important economic sector worldwide, with an estimated annual insured value of around US$ 350bn. However, the economic pressures on the fishing industry are enormous, which increases the likelihood that operators of small or medium-sized vessels will compromise on safety. Many accidents can be avoided if insurers are aware of the risk factors and consider these when underwriting.

Damage to small and medium-sized fishing vessels is the second-most frequent head of loss in CEFOR and IUMI statistics. This equates to a higher loss risk than in other industrial sectors, despite the fact that the overall number of losses in the fishing industry has declined. What kind of losses are involved and are there ways to avoid them? Munich Re loss experts evaluated international losses from the past three years. Their findings paint a nuanced picture of the underlying causes.

Are older vessels more susceptible to damage?
Fishing vessels are categorised according to size. There are smaller boats used for shrimp fishing, sardine boats, and medium-sized trawlers. Large fishing vessels were not considered in the assessment. The smaller and medium-sized fishing vessels are much older than boats in other sectors, with an average age of 26 years. Unsurprisingly, the small vessels – which are often used in family-run businesses – are especially old, with an average age of around 40. Yet the age of the vessels is not an explicit risk factor. The occasional high loss amounts occur mainly with newer vessels that carry more sophisticated technical equipment. Whereas the smaller vessels often only have fishing equipment on board, the larger ones are now more or less like floating factories.

Poorly maintained vessels are loss drivers
Across all types of vessel, negligence is the greatest hazard, followed by concealed material defects.
The most frequent losses are total losses following a fire on board, with mechanical breakdown in second place. In many instances, improper or inadequate maintenance of the vessels is to blame. Apart from damage in the engine room, smaller technical damage can also result in a total loss, for example if out-of-date or faulty equipment in the crews’ quarters causes a short circuit. 

In tandem with this, there has been a sharp rise in cost pressures in the fishing industry. Over the last two decades, the number of smaller and medium-sized fishing vessels has doubled. In order to meet the increased global demand for fish, fishers are being forced to change their routes. Whereas in the past they primarily fished in coastal waters, fishing boats are now having to go further out to sea due to the overexploitation of many coastal fishing grounds, resulting in longer trips. High economic pressures mean that there are often not enough people on board to manage the workload, and the understaffed crew then has to perform both fishing and sailing duties at the same time. The captain is expected to plan and carry out the fishing, while simultaneously keeping an eye on engineering and navigational aspects. This double burden further increases the risk of the vessels not being properly maintained.

Failure to comply with existing regulations
As well as certain regional differences, such as the crew’s general level of training and how strictly regulations are adhered to, the size of the vessels also plays a key role. For instance, the fact that large tuna boats (which locate shoals with the help of helicopters) have well-trained staff ensures that these vessels are properly maintained. In addition, technical requirements (such as International Safety Management standards) are strictly complied with, and both shipping company and government checks are carried out at regular intervals. In contrast, smaller vessels are not obliged to comply with such standards as the ISM guidelines, SOLAS or MARPOL regulations. Worldwide, over 90% of smaller fishing vessels are not classified. And while binding national and international regulations are in place, these are not always adhered to in many regions. One way that insurers could reduce losses would therefore be to give greater consideration to existing standards, like the Cape Town Agreement (2012), when assessing the risk.

Further examples of human error include fires in sleeping quarters and galleys caused by the improper use of outdated or faulty electrical appliances, such as hairdryers or coffee makers, and the deliberate flouting of regulations, such as smoking bans in sleeping quarters.

Exhausted crews make mistakes
One of the biggest risk factors is crew fatigue. Due to the increased cost pressures at sea and the resulting work overload, many sailors suffer from exhaustion and chronic fatigue. This state of permanent sleep deprivation increases the probability of losses attributable to human error. In this context, not having enough staff on board can be a loss driver – particularly on smaller vessels. Benedikt Funke, a qualified sea captain and senior underwriter at Munich Re, advises insurers to pay close attention to the number of people on board: “In order to reduce the risk from fatigue, a minimum crew size must be ensured, including on smaller fishing vessels, so as to maintain the necessary balance between work and rest time.”

Sleeping captain causes total loss
Loss adjusters also report inadequate or incomplete communication between fishing vessels, something that is blamed on a frequent lack of sleep. One such example was a collision between two vessels engaged in what is known as pair trawling in spring 2022. With this type of fishing, the net lines are strung between two vessels, allowing the fishing to be coordinated, with the two captains organising the joint activity by radio. On the day of the collision, their parallel alignment failed because of a lack of communication between the two captains. While planning the route, one of the two had not respected rest-time regulations and had then fallen asleep from exhaustion. Technical equipment that should have woken him up had been switched off.
According to loss adjusters, it is frequently the case that vessels are equipped with technical aids to avoid collisions, but the equipment is simply not used. In addition, the watertight door between the engine room and the factory area had not been closed. In this case, as so often, a combination of various factors triggered by human error led to a total loss. Following the collision, the vessel sank so rapidly that there was no time to make an emergency call or to launch the lifeboats. The ship sank to a depth of 500 metres, but fortunately the crew escaped unharmed.

Outlook
Most losses are caused by human error. Insurers can reduce these losses by reviewing the application of safety regulations and incorporating these into their underwriting (along with a requirement to comply with the International Convention on Standards of Training, Certification and Watchkeeping for Fishing Vessel Personnel (STCW-F)). https://www.imo.org/en/OurWork/HumanElement/Pages/STCW-F-Convention.aspx.). To counter non-compliance with existing regulations, insurance cover could also be refused in countries where specific regulations are not an integral part of local legislation.

The analysis has shown that it can also help to minimise losses if underwriters and risk managers coordinate within the company. This process can be improved by refining the risk questionnaire about possible causes of loss. Instead of emphasising the loss history, insurers should pay more attention in future to the human factor. For example, before concluding a contract, subjects such as work and rest periods, the number of sailors on board, and the number of days spent at sea should be addressed.