Earlier this year, Allianz published its latest Risk Barometer – the annual corporate risk survey which details Top 10 Global Business Risks for 2019. The survey was conducted among Allianz business customers, insurance brokers, industry trade organisations, and also surveyed risk consultants, underwriters, senior managers and claims experts in Allianz corporate insurance segment. In total, the 2019 Risk Barometer incorporates the views of a record 2,415 respondents from 86 countries and 22 industry sectors.
The Top 10 Global Business Risks for 2019 are summarised in the table below, together with their relevant position year-on-year. In today’s post, we’ll look in detail at the top three risks – you can read the complete Risk Barometer 2019 on official Allianz website.
#1 Business Interruption
A consequence of many of the other top risks, business interruption (BI) is the top threat for companies for the 7th year running (37%). According to Allianz, the average BI property insurance claim now totals €3.1mn: this is more than a third higher than the underlying property damage loss (€2.2mn).
Businesses face an increasing number of BI scenarios in today’s networked society, and many can occur without physical damage but with high losses. Events such as breakdown of core IT systems, product recall, quality incidents or environmental pollution can bring businesses to a standstill and unable to provide products and services, having a devastating effect on revenues.
Meanwhile, in today’s uncertain political and business landscape, changes in regulation and legislation, such as the UK’s expected Brexit departure from the EU, also bring significant BI risk. Companies can often underestimate the complexity of getting back to business but risks can be mitigated. A sound business continuity plan should be written and tested well in advance and designed to test location-specific vulnerabilities.
#2 Cyber Incidents
For the first time, Business Interruption is joined at the top of the risk ranking by cyber incidents (37%). According to this survey, even the average insured loss from a cyber incident is now over €2mn, compared with almost €1.5mn from a fire/explosion incident, while losses from major cyber events can be in the hundreds of millions or higher.
Increasingly, cyber incidents bring their own BI losses. Respondents rank cyber as the BI trigger they fear most, given many companies’ primary assets can often be data, service platforms or groups of customers or suppliers. Many incidents are the result of technical glitches or human error rather than malicious acts, and incidents such as power surges or failed IT platform migrations can cost hundreds of millions. Reliance on IT service providers – such as cloud services, online booking platforms and supply chain systems – also brings potential business interruption exposures.
Increasing concern over cyber incidents follows a watershed year of activity. Cyber crime costs an estimated $600bn a year: this compares with a 10-year average economic loss from natural catastrophes of around $200bn – three times as much. Impact of mega data breaches, privacy scandals and the introduction of the European Union’s General Data Protection Regulation – which has also introduced tougher privacy rules and the threat of large fines – are also occupying companies’ thoughts.
#3 Natural Catastrophes
As economic losses caused by disasters increase and concern over climate change grows, both businesses and their insurers need to stay on top of changing exposures around the world in order to effectively manage natural catastrophe risk through appropriate insurance programmes. Although there has not been a single major natural catastrophe event comparable in size with the 2017 hurricane events, the 2018 aggregated losses from multiple smaller and mid-sized events, such as storms, floods, wildfires and earthquakes, have led to considerable overall economic losses of $146bn ($79bn insured losses).
In order to help businesses mitigate their exposures and reduce the impact of natural catastrophe activity, insurers are using a range of sophisticated catastrophe management tools to monitor storms and assess natural catastrophe activity. And a key element of disaster preparedness is emergency scenario planning which involves among many other aspects, the analysis of the supply chain.
Respondents are concerned that recent activity could be a harbinger of increasing financial losses and disruption causing the climate change to rise to its highest-ever position. In addition to damage and disruption to property, climate change is likely to have big implications for regulation and liability too.
Martin Insurance can provide Business Interruption, Cyber and Property Damage insurance for your business. If you would like a quotation or require any assistance, please call us on 049-4332944, e-mail firstname.lastname@example.org or complete our online enquiry form.
Disclaimer: The material contained is this article is for general information purposes only and does not constitute professional advice.