As commercial ships become bigger, more complex and more “plugged in” technologically, the risk landscape increases too. Captain Rahul Khanna, the Global Head of Marine Risk Consulting at Allianz Global Corporate & Specialty (AGCS), gives a captain’s perspective as he reflects on navigating big ships on the one hand and a global risk consulting team on the other.
Navigating the storm
Rahul Khanna spent the worst night of his life in the Caribbean.
He had been tracking the hurricane for awhile but this one caught him by surprise. Hurricanes move along a boomerang type path but do not deviate frequently. In the Northern Hemisphere, hurricanes usually don’t turn southward. This one did so, quite unexpectedly, and almost trapped Khanna and his crew. It was a beast of a storm.
It was 1999. Khanna served as Second Officer aboard the BT Nimrod, a 70,000 ton oil products tanker. Also on board was his wife, Nameeta, and their two year-old son.
"The interesting thing about a hurricane is that, in the Northern hemisphere, it only turns towards the northeast or west and no other direction," says Khanna. "On paper, its track looks like a boomerang."
Faced with riding out the storm or heading to port, the ship had no choice but to keep going along, hopefully in an evasive tack. The damage a hurricane could cause to the 240-meter long tanker in harbor could be even worse than any impairment at sea.
He steered south, hoping to sideswipe the storm.
The hurricane followed.
Surviving a hurricane
Four years later, safely back at home base in London, Khanna successfully passed examinations to become a captain. Then, in 2005 - and after 12 years at sea including two spent as captain - he decided not to return to life on the ocean. With an onshore career in sight, Khanna invested his life’s savings to earn a Master's degree in Shipping, Trade & Finance at London University’s Cass School of Business.
Today, Captain Khanna, Global Head of Marine Risk Consulting at AGCS, is still riding out hurricanes, but only in the metaphorical sense from his desk in London where Allianz insures ships like the Nimrod.
Recalling the storm he explains: "The rain was so loud we couldn't hear our own voices.”
The "Nimrod" tossed in the waves. Fridges tumbled over in the cabins. Chair legs snapped like kindling. Even though the crew had fastened down the furniture beforehand, the storm shook it apart. Khanna kept at his job on the bridge throughout.
"At one stage we weren't moving at all, even though the engine was running full throttle,” he remembers. “For a day and a half the seas churned and the rain poured.”
“If you're ever trapped at sea in a hurricane, you just have to keep going. There's not much else you can do. The storm will always be faster than you. The closer it gets, the higher the waves. And the greater the danger.”
He assured his wife that large ships were built to survive storms.
"I'm not afraid," Nameeta said. "The main thing is that we're together."
Khanna was reassuring. He had responsibilities to the ship, the crew, his wife, their son. Was he scared?
"I was absolutely terrified," he says. But he knew he had to stay in control.
The tanker, crew and the Khanna family survived the storm unscathed.
Now, as then, Khanna has responsibilities. Only now they are to customers. His global team of 20 experts – the largest such team in the marine industry in the world – aim to deliver expertise, not empty promises.
But despite that expertise, there are still things that make Khanna shudder. Things sometimes happen that even risk models cannot always predict.
In 2012, the world witnessed one such scenario when the Costa Concordia cruise ship ran aground off Italy’s Isola del Giglio. The ship overturned, resting in shallow waters with most of her starboard side under water. Thirty-two people perished. Recovering the wreck cost more than $2bn.
"The ship had to be salvaged in the most environmentally-friendly way possible," explains Khanna. In other words: great engineering skill was a prerequisite. For environmental reasons, the Italian government forbade salvagers to break the Costa Concordia into pieces – a potentially more cost effective and quicker method of salvage.
Khanna has confronted other catastrophic scenarios, but luckily just on paper – for now. For example, one scenario that starts his mind racing has yet to occur.
"Our department has calculated what the potential costs would be if two new mega-freighters were to collide with each other."
And what if such a collision occurred in a remote location? And both vessels required recovery efforts?
"I didn't look at the numbers,” admits Khanna. “It was just too frightening!"
The Captain smiles and pours himself a “cuppa” - black tea, tempered with milk.
From his fourth-floor office, in the heart of London, Khanna navigates another sea – of bankers, insurers, brokers, all bustling amid the storm of the global insurance market. Doing business with risk is the oldest trade in the world.
"Of course, it seems unlikely that this kind of scenario would happen, but it cannot be discounted," says Khanna. “It’s important that such events be modelled – because they can be mitigated.”
That assurance is what, he thinks, makes Allianz different as a major global marine insurer:
"We're a company that fully believes in the value of safety. We put our customers under pressure because we want to know as much as we possibly can about their awareness of risks. What standards do they use? How closely do they stick to safety guidelines?"
"We are particularly attractive for safety-conscious customers. Thanks to them, our portfolio is in excellent shape. Hence, Allianz can claim to be one of the leading carriers in the market."
According to the 2015 Safety and Shipping Review, an Allianz study investigating trends and inherent risks on the high seas, traveling by sea has become safer in recent years. In 2014, “only” 75 large ships were lost, the lowest number in 10 years. The risk of extensive and costly damages, however, is much greater because mega-ships are increasingly more expensive to operate.
Container shipping these days is a world marked by superlatives. Sizes and weights are colossal. For example, the MSC Oscar, the world’s largest freighter, was launched in early 2015. Its deck would hold four football pitches in a row. Empty, it weighs 60,000 tons. Its engines generate 83,800 horsepower. It stretches 395.40 meters long. Standing vertically, Oscar would tower above the Fernsehturm Berlin (TV Tower) and New York’s Empire State Building. The twin spires of the Cologne Cathedral wouldn't even reach to Oscar’s mid-deck.
In short, it’s big!
"But as big it is, Oscar certainly is not the longest ship ever to be constructed," says Khanna. “That was the Jahre Viking, an oil tanker launched in 1975, which was extended in 1980 to become the longest ship of all time at 458.45 meters – a full 63 meters longer than Oscar. But while it previously took years for these kinds of records to be broken, it now only takes a matter of months.”
Container ships are measured in units called TEUs (twenty-foot equivalent units) that describe a ship’s maximum freight volume. A standard shipping container is 20 feet long by 8 feet wide and between 8 and 9.5 feet tall, although there are some modern containers that are 40 feet long.
Oscar is a 19,225 TEU vessel; 39,000 cars could fit into it. Despite such a huge size, however, plans are already underway for ships of up to 24,000 TEU. Efficiency is the key focus of container shipping.
Khanna emphasizes that shipping is by far the most important method of transport for global trade. Rail freight is limited to dry land. Airplanes are expensive and only have limited available space. Most of the globe is covered by water.
But only a few people are aware of how important shipping is. And even fewer have any idea of the working conditions, problems and risks which confront ships’ captains and crew members. "Life at sea can be hard," says Khanna.
Cyber threat on the waves
Just as he always encouraged training new crew members and officers onboard, life-long learning applies to Khanna, too. It's not just the weather at sea that is changeable. Increased digitalization is becoming the norm in the industry, bringing with it advantages and disadvantages.
A major new risk for shipping is cyber-attacks. Computer-navigated container ships like the Oscar are too large and too fast - with speeds of up to 20-25 knots - to be attacked by pirates. But they could be a target for hackers. Even today, ships sailing in coastal regions could have their controls taken over by virtual intruders.
Such a scenario was demonstrated by researchers at the University of Texas who hacked into the IT system of a large yacht near the coast and managed to bring it off course in 2013.
"The threat of cyber risks in this sector may well be in its infancy," says Khanna, "But the threat is real. You have to defend yourself like you're facing a hurricane: take precautions, look forward and hold your course.”