Business interruption losses increasing in frequency, severity, Allianz report finds

Corporate risk managers cite business interruption as the most significant risk they face these days, due to the interconnected nature of systems, industries, and supply chains, according to a new report, “Global Claims Review 2015: Business Interruption In Focus,” from Allianz Global Corporate & Specialty (AGCS).

AGCS found that business interruption losses now account for the majority of nearly all large property insurance claims, at an average of $2.38 million, 36 percent higher than the related average direct property damage loss. In the last five years, BI claims have been a primary loss driver for large losses following fires, storms, floods, and earthquakes, according to AGCS’ review of over 1,800 large BI claims from 68 countries.

“This growth in BI claims is fueled by increasing interdependencies between companies, the global supply chain and lean production processes,” said 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.”

Although 88 percent of BI losses are not catastrophe-related, AGCS explained that one fire or a flood in a region can result in claims from many insured companies. AGCS highlighted two explosions in the Chinese port city of Tianjin in an event that killed 170 people, destroyed property, and caused disruptions for other businesses.

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