Global supply chains are increasing the severity and frequency of business interruption claims, with the average large business property insurance claim rising to more than $2.4 million (£1.6 million), according to an analysis of 1,800 claims over four years.
Increased interconnectivities and interdependencies between companies, as well as lean production processes, have contributed to both the rise in business interruption claims and new risks to business, according to The Global Claims Review 2015: business interruption in focus report.
Insurer Allianz Global Corporate and Specialty also found that the majority (88 per cent) of business insurance claims originate from technical or human factors, not natural catastrophes.
The top 10 causes of business insurance loss account for over 90 per cent of such claims by value.
“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,” said Chris Fischer, CEO of Allianz Global Corporate and Specialty.
The analysis found that average business interruption losses are highest by value for claims originating from energy, totalling $4.3 million (£2.8 million). Exposures have increased as a result of larger onshore energy facilities and growing interdependencies between companies.
“BI exposures are largest for sectors with high levels of interconnectivity and technological values as well as concentrations of risks in single locations such as automotive, semi-conductors and power and petrochemical plants,” says Alexander Mack, chief claims officer, Allianz Global Corporate and Specialty. “While modern supply chains may be flexible and cost-efficient, they are also more vulnerable to disruption. Comprehensive business interruption coverage is increasingly being seen as an essential part of today’s insurance policy for many businesses.”
Top causes of business interruption loss globally, by total value (2010-2014):
1. Fire and explosion
3. Machinery breakdown
4. Faulty design/material/manufacturing
6. Cast loss (entertainment)
9. Human error/operating error
10. Power interruption