Survey shows business interruption, cyber as top risks

Business interruption (BI), including supply chain disruption, and cyber incidents were identified as the most widely perceived risks for the private sector this year, as reported in German insurance giant Allianz' 2019 risk barometer.

The study found that 37% of respondents identified both BI and cyber incidents as leading risks, though BI received more responses by number.

The percentages represent survey answers where 2,415 respondents from 86 countries identified risks for up to two of the industry sectors covered by the Allianz study. Respondents could name up to three risks per industry.

The top results are similar to the 2018 risk barometer that indicted a 42% response for BI and 40% for cyber.

In the report's executive summary, Allianz noted that the average BI P&C claim now totals over US$3.4mn, noting, "This is more than a third (39%) higher than the corresponding average direct property damage loss (US$2.5mn) with these totals significantly higher than five years ago."

The firm added that the largest BI events are capable of generating liabilities in the hundreds of millions or higher. Incidents can also occur without physical damage but still have high losses, as can occur with a breakdown of core IT systems, product recall or quality incidents.

"Terrorism, political violence or rioting and environmental pollution can bring businesses to a standstill, meaning firms may be unable to provide products and services - or customers stay away - having a devastating effect on revenues," noted the summary.

According to Allianz Global Corporate & Specialty (AGCS), the average insured loss from a cyber incident is now just over US$2.3mn, coming in higher than the average fire/explosion loss at US1.7mn. As with BI, the firm estimates the largest possible cyber incidents running at or above hundreds of millions in terms of damage.

Allianz also noted that BI and cyber can and have cross paths, stating, "BI loss was a hallmark of the WannaCry and NotPetya malware attacks in 2017 which disrupted shipping, logistics and manufacturing companies. Insurers have seen a growing number of BI losses trigged by cyber incidents with industry claims exceeding US$100mn."

Angelo Colombo, CEO of AGCS South America, said of cyber risk in Brazil, "Cyber incidents have consolidated first place in the Brazil rankings, reflecting the growing exposure of companies to e-commerce and digitalization of financial transactions."

Natural disaster risk in LatAm

Natural disaster was listed as a top risk in both Argentina and Chile in the study, with Swiss Re's preliminary estimates showing US$146bn in economic losses from natural catastrophes in 2018.

It bears noting that this figure is down from the firm's 2017 estimate of US$330bn in economic losses and US$138bn in insured losses with that year's historic streak of hurricanes.

While neither the Caribbean, Central America or Mexico were specifically profiled in the study, all three subregions have proven exposure to events like earthquakes, flooding and hurricanes, while droughts, flooding and quakes often occur in non-profiled South American nations.

The study added, "Allianz Risk Barometer respondents fear that recent natural catastrophe and extreme weather activity could be a harbinger of increasing financial losses and disruption ensuring climate change/increasing volatility of weather (8th, 13% of responses) rises to its highest-ever position in the global risk ranking."

The following listings break down top risks as identified in the Allianz study for Brazil, Chile and Argentina.