Cyberattacks On Track To Lead Corporate Insurance Claims: Study

The global insurance technology (InsurTech) market is slated to become a $1.1 billion industry by 2023, analysts have predicted, with growing analytics and artificial intelligence (AI) functionality accelerating innovation in the insurance market.

Corporate customers are a driving force behind the InsurTech industry’s growth, with protection against cyberattack losses a popular target among InsurTech innovators and businesses alike. Despite the focus on cyber protection, however, a new report from insurance firm Allianz Global Corporate & Specialty said an unexpected category makes up the most popular type of claim filed by corporate customers of insurance products today.

In analyzing 470,000 corporate insurance claims across 206 countries, totaling $66.5 billion in payouts, Allianz found in its Global Claims Review report that fire and explosions were the biggest causes of loss between 2013 and 2018. Researchers said the high costs are due to the disruptive nature of fires and explosions, including factory, gas and electrical fires.

“It’s mainly [because of] two factors,” explained Allianz Global Head of Claims Philipp Cremer, according to Insurance Business Magazine last week. “One is the high concentration of value, and also the ever-increasing business interruption element of the claim. With the way production companies organize themselves, there is an increasing level of dependency in the production chain, and so business interruption claims do increase very significantly.”

Aviation collisions and crashes landed at the number-two spot of most-expensed corporate insurance claims, with Cremer pointing to the lower rate of fatal air crashes and the rising cost of the rare crash that does occur. In addition to examining the most expensive types of insurance claims, Cremer explained which industries tend to have the largest losses.

“The energy industry has seen quite significant losses,” he said, “and there again, it’s a high concentration of values and the volume of the business interruption which [drive] the losses. The pharmaceutical sector is another one where liability claims can be very significant, so it’s very different scenarios for different sectors.”

Despite the talk of natural disaster-related losses, most notably surrounding multiple deadly hurricanes in the U.S. in 2017, this category actually landed near the bottom of the list in terms of value of corporate insurance claims. Furthermore, discussion about cyberattacks, and the rise in cyber insurance products available to businesses, has not yet coincided with the emergence of cyber-related losses at the top of the list, though Cremer told the publication that rising cyberattack losses and insurance claims are likely ahead.

Overall, he said, organizations have to take a holistic view of their operations and the risks they face.

“What I think is still an area where businesses can further analyze and take precautions is in their supply chains [and] contingent business interruption claims,” he said. “Understanding the supply chain, and finding ways of making it more resilient, I think, is for both our insureds and also for us something that is still an area to work on. Large corporates have thousands, and sometimes tens of thousands, of suppliers, so it is a very complex task.”

Below, PYMNTS breaks down the numbers in the Global Claims Review report, identifying the biggest causes of financial loss for corporates, leading to massive insurance claims.

$16 billion: the total value of corporate insurance claims related to fire and explosion losses. That means fire and explosions accounted for nearly one-quarter of all corporate insurance claims filed between 2013 and 2018.

Fourteen percent of the value of corporate insurance claims were linked to aviation collisions and crashes. According to Cremer, in addition to the lower frequency and higher cost of such incidents, more sophisticated (and, thus, more expensive) air equipment, and the rising disruption to broader air traffic and airport operations, have driven up losses in this category. Important to note, however, is that Allianz is one of the largest providers of insurance for the aviation space, meaning that Allianz data may not represent the whole of the insurance market.

Seven percent of claims were related to natural disasters, which reports said is a particularly noteworthy finding, considering the rising talk of the impact of natural disasters on corporate and supply chain operations. Cremer predicted this figure to rise, as corporate exposure to natural disasters climbs, thanks to the “interdependency of production chains.” Even if one key supplier is in a disaster zone, he said, disruption — and losses — can be high.