Research has shown that corporate insurance claims are typically caused by technical and human factors — and not by natural disasters or cyberattacks, although the latter will have a growing impact in the years to come.Fires and explosions trigger the largest claims for insurers and the businesses they cover, a fresh study by Allianz Global Corporate & Specialty (AGCS) revealed Thursday.
It said the overwhelming majority of corporate insurance claims originated from technical or human factors despite catastrophes such as hurricanes having resulted in devastating losses over the past two years.
For its latest Global Claims Review, AGCS analyzed 470,000 claims in the corporate insurance segment from 200 countries over a five-year period (July 2013 to July 2018).
Globalized business environment
Fires, explosions, aviation incidents, faulty workmanship, maintenance incidents and storms collectively account for over 50 percent of all claims by total value, the study points out.
"The report highlights the increasingly high value at risk for businesses and their insurers alike," said Philipp Cremer, AGCS's global head of claims. "In today's interconnected and globalized business environment, financial losses are increasing due to geographic concentration of values, often in risk-exposed areas, and from the knock-on effects of global supply chains and networks."
In the period under review, fires and explosions caused more than €14 billion ($15.9 billion) worth of losses, the survey said, adding that they were responsible for more than half of the 20 largest non-natural catastrophe incidents analyzed.
"As manufacturers have become more efficient, the values per square meter have risen exponentially," said Raymond Hogendoorn, Property and Engineering Claims specialist at AGCS. "Fire and flood claims are much more expensive per square meter than a decade ago."
It's obvious that costs associated with production standstills can significantly add to the final loss total. Almost all large property insurance claims now include a major business interruption (BI) element, the report notes.
Storms are the only kind of natural catastrophe to appear in the top 10 causes of loss, while technical and human factors account for 87 percent of all claims by value.
The study also looks at the complexity of modern-day supply chains and their effect on the insurance business. It states product liability claims are becoming larger as supply chains in the auto industry and other sectors are now more sophisticated.
AGCS researchers emphasize that companies tend to restrict their number of global suppliers, thus increasing product liability for the fewer suppliers exponentially.
"We are not seeing a rise in the frequency of liability claims, but the value of claims has been rising with higher awards and higher legal costs," Liability Claims expert Peter Oenning explained. "We're also seeing much larger claims in Latin America and Asia than in the past."
He added that there was a time when nine out of 10 of the insurer's largest claims came from the United States, "now it's more like seven out of 10."