BI remains top concern but cyber and market volatility rising fast: AGCS Barometer

"The risk landscape for businesses is substantially changing in 2016. While businesses are less concerned about the impact of traditional industrial risks such as natural catastrophes or fire, they are increasingly worried about the impact of other disruptive events, fierce competition in their markets and cyber incidents," stated AGCS, based on its survey of over 800 risk managers and insurance experts from more than 40 countries. Business and supply chain interruption (BI) remains the top risk for businesses globally for the fourth year in a row, finds the Risk Barometer. "However, many companies are concerned that BI losses, which usually result from property damage, will increasingly be driven by cyber-attacks, technical failure or geo-political instability as new 'non-physical damage' causes of disruption," stated AGCS. This shift in priorities reflects heightened concern over non-physical damage, adds the insurer.hideTwo of the major risers in this year's Barometer feature in the top three corporate risks for the first time with market developments ranking second and cyber incidents third. Cyber incidents are also cited as the most important long-term risk for companies over the next 10 years. Natural catastrophes dropped two positions to fourth year-on-year. This partly reflects the fact that in 2015 losses from natural disasters reached their lowest level since 2009, said AGCS. "The corporate risk landscape is changing as many industrial sectors are undergoing a fundamental transformation," explained AGCS CEO Chris Fischer Hirs. "New technologies, increasing digitalisation and the 'Internet of Things' are changing customer behaviour, industrial operations and business models, bringing a wealth of opportunities, but also raising awareness of the need for an enterprise-wide response to new challenges. As insurers we need to work together with our corporate clients to help them to address these new realities in a comprehensive manner," he added. AGCS reported that more than a third of respondents (34%) identified market developments, such as intensified competition or market volatility/stagnation, as one of the three most important business risks in 2016, ranking this new survey category as the second top peril. Market developments are a particular concern in the engineering, financial services, manufacturing, marine and shipping, pharmaceutical and transportation sectors. This risk ranks as a top two concern in Europe, Asia-Pacific and Africa & Middle East. "Businesses constantly have to be on their toes, turning out new products, services or solutions in order to stay relevant to the customer and to thrive in this rapidly changing and globally competitive environment," explained Bettina Stoob, Head of Innovation at AGCS. "Innovation cycles are becoming rapidly shorter; market entry barriers are coming down; increasing digitalisation and new 'disruptive' technologies have to be quickly adopted while potentially more agile start-ups are entering the game," she added. At the same time businesses also have to comply with changing or enforced regulation, increasing safety requirements or import/export restrictions, added AGCS. Cyber attacks are clearly an increasing concern for businesses globally. This includes cybercrime or data breaches, but also technical IT failures. AGCS said that cyber incidents, cited by 28% of respondents, gained 11 percentage points year-on-year to move from fifth position into the top three global risks for the first time. AGCS said that loss of reputation (69%) is the main cause of economic loss for businesses after a cyber incident followed by business interruption (60%) and liability claims after a data breach (52%). "Attacks by hackers are becoming more target-oriented, lasting for longer and can trigger a continuous penetration", said Jens Krickhahn, cyber insurance expert at AGCS. Cyber attacks are increasing both in frequency and severity, but companies should not underestimate the impact of less exotic operational failure in today's highly digital and connected industries, said AGCS. "A simple technical failure or user error can result in a major IT system outage disrupting supply chains or production," said Volker Muench, AGCS expert for property underwriting. While cyber may be fast rising up the risk agenda, AGCS' survey found that BI remains the top peril. Based on the insurer's recently published claims analysis, BI losses are increasing and typically account for a much higher proportion of the overall loss than a decade ago. BI losses often 'substantially' exceed the direct property loss, it adds. According to responses to the latest Allianz Barometer, causes of BI feared most by companies are natural catastrophes (51%), closely followed by fire/explosion (46%). The survey found, however, that multinational companies are also increasingly worried about the disruptive impact of geo-political instability. "Businesses need to prepare for a wider range of disruptive forces in 2016 and beyond. The increasing impacts of globalisation, digitalisation and technological innovation pose fundamental challenges," said Axel Theis, member of the board of management, Allianz SE and former CEO of AGCS.

BI remains top concern but cyber and market volatility rising fast: AGCS Barometer

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Want to read this article?

Read Next

Insurtech partners with USAID on climate adaptation programme

ICEYE in data collaboration with Juniper Re on flood and wildfire

Senior appointments in Lockton’s crisis management team

European rates up overall but financial and cyber lines falling: Marsh

European Parliament approves regulation to tackle forced labour

Related Articles