The shipping industry is facing a worsening crisis: cargo damage during transit is on the rise. Over the past few years, incident data and industry studies have consistently shown increasing losses due to fire, misdeclaration, and physical damage to cargo. These issues have direct consequences for shippers, forwarders, and insurers, and they signal an urgent need for heightened vigilance and improved risk management across the supply chain.

Key Trends and Data

• According to DNV's 2024 Maritime Safety Trends report (based on Lloyd's List Intelligence data), the number of maritime casualties rose by 15% in 2024,     following a 7% rise in 2023. Between 2018 and 2024, the total number of incidents increased by 42%, while the global fleet expanded by just 10%.
• Cargo fire and explosion incidents rose by 18% in 2024 alone, and by 58% compared to 2014.
• Over 60% of container fires are caused by misdeclared or undeclared dangerous goods, especially lithium-ion batteries, chemicals, and flammable materials.
• The average age of vessels involved in cargo fire or foundering incidents is also rising. In 2024, 52% of all casualties occurred on vessels 20 years or older, reflecting structural fatigue and outdated fire protection systems.

‍Notable Incidents

• X-Press Pearl (May–June 2021): Sank after a chemical fire off Colombo, causing one of the worst marine pollution incidents in the region. Declared General Average; many cargo owners without insurance were unable to reclaim their goods.
• YM Mobility (August 2024): Explosion in a container carrying hazardous cargo at Ningbo-Zhoushan Port, China. Though no injuries occurred, damages were extensive and raised further concerns around undeclared lithium battery shipments.
• MSC Capetown III (August 2024): Below-deck explosion and fire while docked in Colombo. Fire was brought under control, but cargo damage was extensive and led to operational delays.
• ASL Bauhinia (January 2025): Container stack fire and explosion in the Red Sea. Crew evacuated; ship left adrift. General Average was declared.
• MSC ELSA 3 (May 2025): Capsized and sank near the Indian coast, releasing hazardous cargo into the sea. Salvage and environmental efforts are ongoing.
• Wan Hai 503 (June 2025): Explosions among hazardous containers caused a massive fire off the coast of India. Four crew members are missing. The vessel carried over 1,700 containers, including 143 with dangerous goods. General Average was declared.

‍Root Causes

• Misdeclaration  of Cargo: One of the leading causes of container fires. Inadequate shipper disclosure leads to incompatible stowage plans and ineffective firefighting response.
• Aging Fleet: Older vessels lack modern fire suppression systems and are more prone to structural failure.
• Stacking Practices: Increased vessel size has led to higher tacking, complicating cargo access and increasing mechanical stress.
• Inadequate Training and Equipment: Crews are often unequipped to detect and combat fires that start in containers below deck.

‍Consequences for Shippers and Forwarders

• Insurance claims for damaged cargo have risen sharply, with some insurers tightening terms or excluding specific goods.
• Delays and diversions due to onboard incidents result in cascading schedule disruptions.
• General Average declarations shift substantial financial liability onto cargo owners unless adequate cargo insurance is in place. Those without coverage must pay cash contributions before cargo is released.

‍What Is General Average?

In international maritime law, few concepts are as longstanding and consequential as General Average (GA). Despite its ancient origins, GA remains highly relevant in today’s containerized shipping environment – especially as cargo incidents continue to rise.

General Average is a legal principle under which all parties in a sea venture (shipowner, cargo owners, charterers) proportionally share the financial burden of a voluntary sacrifice or extraordinary expense made to preserve the voyage.

In simpler terms: if part of a vessel or cargo is intentionally damaged or lost (e.g., cargo jettisoned, fire-fighting costs, towing after mechanical failure), everyone with cargo onboard must contribute to the associated costs – even if their own cargo was untouched!

What could trigger GA Declaration?

• Fire onboard (e.g., X-Press Pearl, Wan Hai 503, ASL Bauhinia)
• Grounding or mechanical failure requiring emergency towing or salvage
• Jettison of containers to stabilize the ship
• Port of refuge expenses during casualty

Process

Once GA is declared:

1. A General Average Adjuster is appointed.
2. Cargo owners must submit a General Average Bond and often a cash deposit or proof of insurance.
3. Cargo is held at the discharge port until the contribution is secured.

Implications for Cargo Owners

• Even undamaged cargo is held until contribution is secured.
• Uninsured shippers must pay out-of-pocket, often significant sums.
• GA procedures can cause long delays in cargo release.

‍The Importance of Cargo Insurance

The spate of recent incidents underlines the critical need for comprehensive cargo insurance. When General Average is declared, uninsured shippers risk severe financial exposure, as they must contribute to the shared loss even if their own cargo was undamaged. Additionally, insurance ensures swift claims processing, better access to survey and recovery resources, and reduced disruption to cash flow.

Case in Point

In the aftermath of the X-Press Pearl fire in 2021, thousands of containers were damaged or destroyed, and the vessel ultimately sank off the coast of Sri Lanka. General Average was declared, meaning all cargo owners were legally required to share in the vessel’s emergency-related costs – regardless of whether their own goods were damaged.

For uninsured shippers, this became a financial and operational nightmare. Without insurance, they had to either provide a substantial cash deposit or risk forfeiting their cargo altogether. In many cases, these shippers couldn’t afford to pay, and their cargo remained unclaimed or delayed for months – often with deteriorating condition or complete loss in value.

Insured cargo owners, however, were shielded from these risks. Their insurers immediately issued the necessary guarantees to the General Average adjusters, allowing cargo to be released without delay. The insurance also covered associated costs, such as survey fees, legal coordination, and in some cases salvage expenses.

This incident highlighted how a relatively modest investment in cargo insurance can prevent massive disruptions to cash flow and protect against catastrophic loss.

‍Need Guidance?

Our team is available to advise clients on cargo safety strategies, risk assessments, documentation best practices, and insurance options. Reach out to our operations department for support.

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