Report: Business Interruption Claims Rising Due To Interconnected Global Supply Chains

A new study cites fire and explosion as main causes of business interruption loss with cyberattacks, strikes and pandemics a growing concern.

A new report from Allianz Global Corporate & Specialty (AGCS) indicates the average large business interruption (BI) property insurance claim is now in excess of $2.4 million, 36 percent higher than the corresponding average property damage claim of just over $1.7 million.

For the report, the company analyzed more than 1,800 large BI claims totaling over $3.2 billion from 68 countries from 2010 to 2014. They found that both the severity and frequency of BI claims is increasing and today it typically accounts for a much higher proportion of the overall loss than was the case just 10 years ago.

“This 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.”

Top Global BI Loss Claims

According to the analysis, the majority of BI claims originate from technical or human factors (88 percent) and not from natural catastrophes. The top ten 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. In North America, fire and explosion account for 52 percent of BI loss followed by Storm (14 percent), and Cast Loss in the Entertainment Sector (eight percent).

Top Causes of BI Loss Globally by Total Value (2010-2014):

1. Fire and explosion

2. Storm

3. Machinery breakdown

4. Faulty design/material/manufacturing

5. Strike/riot/vandalism

6. Cast loss (entertainment)

7. Flood

8. Collapse

9. Human error/operating error

10. Power interruption

The effects of interconnectivity and interdependencies play an important role in many risks now appearing on the horizon, such as climate change, cyberattacks, pandemics and power outages.

Click here to read the full report.

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