The vast majority of corporate insurance claims over the last five years have originated from technical or human factors, accounting for 87% of all claims by value, according to new research by Allianz Global Corporate & Specialty (AGCS).
The firm’s latest Global Claims Review, which looked at data from 470,000 claims over 2013 to 2018, found that fires/explosions and aviation incidents represented the largest losses for re/insurers.
Fire and explosion incidents alone caused more than €14 billion worth of losses and were responsible for more than half of the 20 largest non-natural catastrophes events that AGCS analysed, with average claims of almost €1.5 million.
Aviation collision and crash incidents (on the ground and in the air) were the second largest cause of loss, with increasing repair costs from composite material and higher value engines on aircraft contributing to costs.
Despite record-breaking natural catastrophe losses in recent years, storm was the only kind of catastrophe event to appear in the top ten causes of loss.
AGCS noted that fires/explosions, aviation incidents, faulty workmanship/maintenance incidents and storms collectively accounted for more than 50% of all claims by total value, with over 75% of financial losses globally arising from 10 major causes of loss.
“The report highlights the increasingly high values at risk for businesses and their insurers alike,” said Philipp Cremer, Global Head of Claims, AGCS. “In today’s interconnected and globalized business environment, financial losses are increasing due to geographical concentration of values – often in risk-exposed areas – and from the knock-on effects of global supply chains and networks.”
“Looking to the future, new technologies bring business benefits but also risks and claims,” he continued. “However, they also provide an opportunity to prevent and mitigate losses and improve the claims settlement process for our customers.”
Raymond Hogendoorn, Property and Engineering Claims Specialist at AGCS, also commented: “In general, property insurance claims are higher with inflation and greater concentration in value as a result of globalization and more integrated supply chains.
“As manufacturers have become more efficient, the values per square meter have risen exponentially. Fire and flood claims are much more expensive per square meter than a decade ago.”
The report also showed that costs associated with Business Interruption (BI) were adding significantly to the financial loss total from fire and explosion incidents, as well as many of the other major causes of loss.
Almost all large property insurance claims now include a major BI element, AGCS said, and the average BI property claim now totals over €3 million, which is around 39% higher than the corresponding average direct property loss (€2.2 million).
Additionally, AGCS found that defective products and faulty workmanship incidents, which account for 14% of all claims by value, are the top cause of liability losses for businesses.
It noted that around one third of all large corporate liability claims now involve litigation with third parties, compared with property insurance where less than 1% of claims do on average.
“We are not seeing a rise in the frequency of liability claims but the value of claims has been rising with higher awards and rising legal costs,” explained Peter Oenning, Liability Claims Specialist at AGCS.
“We are also seeing much larger claims in Latin America and Asia than in the past,” he added. “Once, nine out of 10 of our largest claims globally would have come from the US, now it is more like seven out of 10.”
