An industry report that canvasses 2415 respondents from 86 countries shows business interruption (BI) ranks first in the top 10 risks internationally and second in Australia for 2019.
The eighth Allianz Global Risk Barometer collected data from business customers, brokers, industry trade organisations, risk consultants from 22 industry sectors, underwriters, senior managers and claims experts late last year.
The majority of responses, 50%, came from large organisations with revenues over $500 million, 21% from mid-sized enterprises $250–$500mn and 28% from small businesses (<$250mn).
The results show that BI is still regarded as the primary risk, for the seventh year consecutively. The report’s analysis adds that the global average value of a BI insurance claim, at $3.4mn, is 39% higher than the average direct property damage loss and both are significantly higher than five years ago, with the potential to run into hundreds of millions.
Global risks by ranking
- Business interruption 37%
- Cyber incidents 37%
- Natural catastrophes 28%
- Changes in legislation and regulation 27%
- Market developments 23%
- Fire, explosion 19%
- New technologies 19%
- Climate change/increasing volatility of weather 13%
- Loss of reputation or brand value 13%
- Shortage of skilled workforce 9%
Top risks for Australia
- Changes in legislation and regulation 36%
- Business interruption, including supply chain 32%
- Cyber incidents 30%
- Market developments 30%
- Impact of new technologies 27%
- Natural catastrophes 23%
- Loss of reputation or brand value 22%
- Climate change or increasing weather volatility 18%
- Shortage of skilled workforce 11%
- Fire, explosion 9%
“Businesses across Asia Pacific are deeply concerned about the impact of business interruption,” says Allianz Global Corporate & Specialty Asia Pacific CEO Mark Mitchell, noting that the average BI property insurance claim for the region is now more than $4,750,000, considerably higher than the global average.
“As manufacturing shifts east, and with growing frequency of natural catastrophe activity in the region, Asia Pacific is increasingly exposed to these losses.”
The key Australian concern, not surprisingly given the current political landscape of trade wars, tariffs and uncertainty, is changes in legislation and regulation. Local businesses also place more focus on market developments, and for the first time fire or explosion has entered the top 10 ranking.
The role of new technologies plays into perceived cyber risks, with questions around security, data protection, business continuity and third party liability, as well as the potential for critical infrastructure breakdown. Cyber incidents, along with executive conduct and product recalls, have highlighted the risk of loss of reputation or brand value. A similar interconnected cluster relates to natural catastrophes and climate change or weather volatility.
How Gallagher can help
Business interruption remains a consistently under-insured risk. Our experts can help organisations to respond proactively to the risk barometer information across all of the major exposures, which include our key specialisms, as well as providing business income protection cover.