Business Interruption (BI), exacerbated by the growing threat from supplier failure, cyber incidents and terrorist events, remains the top perceived global insurance risk, according to a survey by Allianz Global Corporate & Specialty (AGCS).
After a year of shocks and political perils, companies greatly fear the rising protectionism and anti-globalisation trend, but the lightning speed of technological transformation of business is bringing Business Interruption a new and challenging set of risks.
Volker Muench, Global Practice Group Leader, Property Underwriting, AGCS, noted; “New triggers for BI emerge constantly. These can range from cyber incidents to market developments to the changing political landscape.
“Going forward we expect there to be more non-damage triggers of BI. It is important that our insured customers understand the evolving threats they are facing.”
Companies technologically upgrading is the main driver behind new forms of BI risk; digitalisation means an ever-greater interconnectivity of machines, companies and supply chains.
The “Internet of Things” (IoT) has revolutionised the speed and cost of production, but also multiplied the risk of loss in case of a cyber attack or accident.
Risks soar as supply chain costs fall; Mark Mitchell, CEO AGCS Asia, says some cost-cutting measures like reliance on single-source low-cost suppliers “can be recipes for disaster.”
Cyber risk concerns rose to 2nd most feared threat of loss in the US and Europe, and 3rd globally.
In the digitalized production or Industry 4.0 environment, a failure to submit or interpret data correctly could stop production.
“There is a need for real data or information on risk exposures, both tangible and intangible, in an environment that is continuously changing,” said Thomas Varney, Regional Manager, Americas, Allianz Risk Consulting.
Market developments and volatility ranked second place in top perceived threats with companies anticipating sudden changes of rules that could impact markets.
Political violence events, such as war, civil war, insurrection and other politically motivated incidents is a growing risk particularly in the Middle East and Africa, but also globally, according to Allianz.
Natural disasters and climate change are the third listed top threat globally and rose to top concern In Hong Kong and Japan where the Kumamoto earthquake was the costliest disaster globally of 2016.
“Natural catastrophes and climate change worry our customers and society at large,” says Axel Theis, Board Member of Allianz SE.
“We must assume that global warming above 1.5 degrees Celsius would intensify climate damages.
“It is our task as an insurer to develop solutions for these scenarios and establish prevention and insurance protection for, and together with, our customers and public partners.”
The AGCS surveyed 1,237 risk experts across 55 countries; it showed companies bracing for a year of change and uncertainty and stressed the need to invest in resources to better monitor, assess, and quickly adapt to these risks.
Allianz stressed that the challenge ahead of risk management will be proactivity in the technological race and swiftly adapting to new threats with a “re-thinking of current monitoring and risk management tools.”
Along with the challenge of adapting current monitoring and risk assessment tools to suit the changing market, the growing threats to business from Business Interruption and cyber incidents are creating new opportunities for insurance and reinsurance markets to hone in on.