- Increasing interconnectivity of global supply chains drives business interruption risk and losses
- Fire and explosion the main cause of business interruption loss for businesses
- Human and technical factors dominate causes of business interruption, far exceeding impact of natural hazards
- Non-damage causes of business interruption such as cyber-attacks, strikes and pandemics are increasing
In its new report, AGCS analyzes more than 1,800 large BI claims totaling over €3 billion from 68 countries for the period 2010 to 2014. AGCS participated either as lead or as co-insurer in these claims. Both severity and frequency of BI claims is increasing, which are mostly caused by non-natural hazards such as human error or technical failure rather than from natural catastrophes. The top 10 causes of BI loss account for over 90 percent of such claims by value, with fire and explosion being the top cause, accounting for 59 percent of all BI claims globally. Each fire and explosion incident analyzed averaged €1.7 million in BI costs alone.
“The growth in BI claims is fueled by increasing interdependencies between companies, the global supply chain and lean production processes,” explains Chris Fischer Hirs, CEO of AGCS. “Whereas in the past a large fire or explosion may have only affected one or two companies, today, losses increasingly impact a number of companies and can even threaten whole sectors globally. With our experts researching this topic, we are well positioned to respond to this evolving risk.”
High BI exposure for automotive or semi-conductors plants
BI trends selected industries
Average BI losses are highest by value for claims originating from energy (€3.96 million) and property (€2.21 million) lines of insurance, followed by engineering (€0.9 million) and entertainment (€0.3 million). The cost of large energy claims has been rising, with BI now accounting for a higher proportion of loss totals, as exposures have increased due to larger onshore energy facilities and growing interdependencies between companies resulting in regional CBI claims if one plant is disrupted. At the same time BI insurance demand has risen because new buyers from Russia in particular are purchasing BI cover for the first time while existing buyers in the US and Europe are looking for higher insurance limits.
In the entertainment sector, illness or an accident of a cast member is the most prevalent cause of interruption: Injury to a major star can delay the production, leading to multi-million dollar claims. This so-called ‘cast loss’ is responsible for 60% of such claims received in the sector and almost three quarters of claims by value. The proliferation of costly visual effects in film production, which often require contractual commitments with third party specialists, can cause more expensive claims through production delays.
Non-damage BI scenarios increasing
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About Allianz Global Corporate & Specialty
Worldwide, AGCS operates with its own teams in 34 countries and through the Allianz Group network and partners in over 210 countries and territories, employing almost 4,700 people of 70 nationalities. AGCS provides insurance solutions to more than three quarters of the Fortune Global 500 companies, writing a total of €7.4 billion gross premium worldwide in 2017.
AGCS SE is rated AA by Standard & Poor’s and A+ by A.M. Best.