New York—Jan. 14, 2016—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. These are the key findings of the Allianz Risk Barometer 2016, the fifth annual survey on corporate risks published by Allianz Global Corporate & Specialty (AGCS), which surveyed over 800 risk managers and insurance experts from more than 40 countries.
According to the Allianz Risk Barometer, business and supply chain interruption (BI) remains the top risk for businesses globally for the fourth year in succession. However, many companies are concerned that BI losses, which usually result from property damage, will increasingly be driven by cyberattacks, technical failure or geo-political instability as new non-physical damage causes of disruption.
Market developments, which consist of market volatility, intensified competition and market stagnation, together with cyber incidents, debuted in the top three global business risks; cyber incidents also were cited as the most important long-term risk for companies in the next 10 years. In contrast, natural catastrophes dropped two positions to fourth year over year, reflecting the fact that, in 2015, losses from natural disasters reached their lowest level since 2009.
In the U.S., BI was cited by 39 percent of respondents as the top business risk, followed by natural catastrophes (33 percent) and cyber (32 percent).
“Business interruption continues to be the primary concern of risk managers and how well a company responds will determine how well it survives to compete,“ said Hugh Burgess, global head of mid-corporate and head of corporate lines, North America. “As global supply chains continue to grow and increase in complexity, the threat of BI continues to incubate in numerous and increasing areas, which in turn, continues to weigh on the minds of risk managers today.”
Rising Sophistication of Cyber Attacks
Another area of increasing concern for businesses globally is the threat of cyber incidents, which include cybercrime, data breaches and technical information technology (IT) failures. Cyber incidents gained 11 percentage points year over year to move from fifth position to debut in the top three risks (28 percent of global responses). Five years ago, cyber incidents were identified as a risk by just 1 percent of responses in the inaugural Allianz Risk Barometer; loss of reputation (69 percent) is cited as the main cause of economic loss for businesses after a cyber incident, followed by BI (60 percent) and liability claims after a data breach (52 percent).
While the cyber insurance market is still in its infancy in Europe, albeit developing quickly, the U.S. market already reached maturity and experienced substantial losses.
“The U.S. is unique in that we have already paid losses in the hundreds of millions to cover cyber loss. Breaches happen everywhere, but the U.S. has complex regulatory regimes and an extremely active plaintiff's bar. These dynamics have driven the price of loss higher in the U.S. than anywhere else,” said Emy Donavan, national practice leader - cyber. “Boards and C-suites in the U.S. are acutely aware of the individual risk they may have if a cyber event occurs on their watch. Litigation trends and case law are developing so quickly that potential liability associated with clients’ normal operations can change literally overnight.”