Cyber biggest risk in Allianz Barometer as pandemic fears recede

Cyber is the biggest business risk this year, knocking business interruption (BI) off the top spot into second place, with natural disasters third, as fears over the pandemic lift, according to the Allianz Risk Barometer 2022. But the 2,650 risk experts around the world polled still ranked a pandemic outbreak as the fourth-biggest threat facing companies in 2022, with climate change joining nat cats as a significant riser on the back of mounting concern over extreme weather events and transition risk. Cyber incidents are the number one risk for only the second time in the annual Barometer’s 11-year history. Cited by 44% of respondents, cyber risk rises from third position last year. BI drops from first place last year to a close second in 2022, on 42%. Natural catastrophes rank third (25%), up from sixth in 2021, and climate change climbs to its highest-ever position of sixth, on 17% and up from ninth last year. Meanwhile, pandemic outbreak drops from second place a year ago to fourth on 22%. The Barometer polled risk experts – including risk managers, CEOs, brokers and insurers – from 89 countries and territories in October and November. Allianz Global Corporate & Specialty (AGCS) CEO Joachim Mueller said the findings suggest that “business interrupted” will likely remain the key underlying risk theme in 2022. Cyber incidents rank as a top three peril in most countries surveyed, including many in Europe. Ransomware comes out as the joint top cyber concern along with data breaches, both flagged by 57% of respondents. Allianz says recent ransomware attacks have shown worrying trends, such as ‘double extortion’ tactics combining system encryptions with data breaches. The insurer explains that cyberattacks are exploiting software vulnerabilities that potentially affect thousands of companies and targeting physical critical infrastructure. Cybersecurity also ranks as a major ESG concern. Respondents acknowledged the need to build resilience and plan for future outages, or face the growing consequences from regulators, investors and other stakeholders. “Ransomware has become big business for cybercriminals, who are refining their tactics and lowering the barriers to entry for as little as a $40 subscription and little technological knowledge. The commercialisation of cybercrime makes it easier to exploit vulnerabilities on a massive scale. We will see more attacks against technology supply chains and critical infrastructure,” explained Scott Sayce, global head of cyber at AGCS. Allianz also explains that cyber insurance claims have increased significantly during the past three years. But as business and insurers take steps to increase cybersecurity and resilience, and with an increased focus on ransomware by law enforcement agencies, ransomware claims are showing some tentative signs of stabilising, according to Shanil Williams, chief underwriting officer, corporate at AGCS. “There has been a slight deceleration in ransomware claims, although they remain at elevated levels. Future claims trends are difficult to predict, as perpetrators are always looking to exploit new vulnerabilities and employ new tactics. Cyber is one of those lines of business where you can cover one hole in the bucket only to find a new exposure emerges,” said Williams. BI falls from top spot but ranks second in a year marked by widespread disruption as vulnerabilities in modern supply chain and production networks become more obvious than ever, says Allianz. Cyber is the most feared cause of BI, according to 52% of risk experts surveyed, followed by natural catastrophes on 36% and a pandemic outbreak on 35%. BI caused by major transportation and shipping disruption comes fourth on 30%. In the past year, post-lockdown surges in demand have combined with disruption to production and logistics, as Covid-19 outbreaks in Asia closed factories and caused record congestion in container shipping ports. Pandemic-related delays compounded other supply chain issues, such as the Suez Canal blockage or the global shortage of semiconductors after plant closures in Taiwan, Japan and Texas from weather events and fires. “The pandemic has exposed the extent of interconnectivity in modern supply chains and how multiple unrelated events can come together to create widespread disruption. For the first time, the resilience of supply chains has been tested to breaking point on a global scale,” said Philip Beblo, property industry lead for technology, media and telecoms at AGCS. Allianz notes in the Barometer that the recent Euler Hermes Global Trade Report suggests that the Covid-19 pandemic will likely drive high levels of supply chain disruption into the second half of 2022. But it also says that mismatches between global demand and supply are eventually predicted to ease, assuming no further unexpected developments. Allianz adds that awareness of BI risk is becoming an important strategic issue across entire companies. “There is a growing willingness among top management to bring more transparency to supply chains, with organisations investing in tools and working with data to better understand the risks and create inventories, redundancies and contingency plans for business continuity,” said Maarten van der Zwaag, global head of property risk consulting at AGCS. Pandemic outbreaks remain a big concern for companies in the year ahead, despite dropping to fourth place. It is worth noting that the survey took place before the emergence of the Omicron variant. The majority of respondents (80%) think they are adequately or well prepared for a future Covid-19 flare-up, with business continuity management being used to boost resilience. Another shift in this year’s Barometer is the rise of natural catastrophes to third place and climate change to sixth. These two risks are closely related, and the rising concern follows an increase in the frequency and severity of weather events during recent years as a result of global warming, says Allianz. Global insured catastrophe losses were well in excess of $100bn last year, and one of the highest annual figures on record. Hurricane Ida in the US was the costliest event in 2021, but more than half of the losses came from so-called secondary perils such as floods, heavy rain, thunderstorms, tornados and even winter freezes. These secondary perils are increasingly costly events. Examples in 2021 included Winter Storm Uri in Texas; the low-pressure weather system Bernd, which triggered catastrophic flooding in Germany and Benelux countries; the heavy flooding in Zhengzhou, China; and heatwaves and bushfires in Canada and California. The latest Allianz Barometer shows that risk experts are most concerned about climate change-related weather events causing damage to corporate property (57%), followed by BI and supply chain impacts (41%). Companies are also worried about managing their transition to a low-carbon economy (36%) and avoiding potential litigation risks for not adequately taking action to address climate change (34%). “The pressure on businesses to act on climate change has increased noticeably over the past year, with a growing focus on net-zero contributions,” said Line Hestvik, Allianz’s chief sustainability officer. “There is a clear trend for companies towards reducing greenhouse gas emissions in operations or exploring business opportunities for climate-friendly technologies and sustainable products. In the coming years, many corporate decision-makers will be looking even more closely at the impact of climate risks in their value chain and taking appropriate precautions. Many companies are building up dedicated competencies around climate risk mitigation, bringing together both risk management and sustainability experts,” added Hestvik. Allianz CEO Mueller said the Barometer shows that the biggest fear for most companies this year is simply not being able to produce their products or deliver their services. “2021 saw unprecedented levels of disruption, caused by various triggers. Crippling cyberattacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks, wreaked havoc. This year only promises a gradual easing of the situation, although further Covid-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies,” he said. Allianz Risk Barometer 2022: Top ten global business risks (2021 ranking in brackets): Cyber incidents 44% (3rd) Business interruption 42% (1st) Natural catastrophes 25% (6th) Pandemic outbreak 22% (2nd) Changes in legislation and regulation 19% (5th) Climate change 17% (9th) Fire, explosion 17% (7th) Market developments 15% (4th) Shortage of skilled workforce 13% (13th) Macroeconomic developments 11% (8th) Allianz’s annual corporate risk survey that feeds into the Barometer was conducted among its customers, brokers and industry trade organisations. It also surveyed risk consultants, underwriters, senior managers and claims experts in the corporate insurance segment at both AGCS and other Allianz entities. Most answers (1,208) related to large companies with annual revenue of more than $500m. Mid-size companies with revenues between $250m and $500m contributed 518 responses, while small enterprises with revenue of less than $250m produced 924 respondents. Risk experts from 22 industry sectors were polled overall. The Allianz Risk Barometer 2022 can be downloaded here.

Cyber biggest risk in Allianz Barometer as pandemic fears recede

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