While business interruption and natural disasters continue to be foremost on the minds of companies across the world this year, 2014 also marks an increased concern over cyber crime and company fraud in the corporate sector, a survey from insurer
Allianz SE reveals.
The third annual survey from the global insurer asked more than 400 corporate insurance experts in 30 countries which major risks will occupy the attention of both large and mid-sized businesses.
While business interruption, natural catastrophes and fire all declined since 2013, they remain the most talked-about risks this year.
Clem Booth, a member of Allianz SE’s Board of Management, noted that business interruption and natural disasters often overlap, and anticipating these events is a good way to minimize potential harm.
“As the increase in the number of extreme weather events around the globe demonstrates, climate change is becoming more specific and threatening,” Booth said. “More needs to be done in terms of prevention, than to rebuild what has been destroyed after each disaster.”
Julie Rochman, CEO of the Insurance Institute for Business and Home Safety, said one way producers can help strengthen preventative measures is to identify alternate facilities and equipment so that a business can relocate and continue to work in the event of a natural disaster.
“I’d say making sure a solid business contingency plan is in place is the most important thing a broker can do for businesses,” Rochman said. “Something like a quarter of businesses never reopen their doors after a natural disaster. They need somewhere to go in the meantime and they need to make sure their records are backed up electronically.”
In addition to a business contingency plan, solid coverage through business income, extra expense, contingent business interruption and civil authority lines are vital, IBHS said.
Meanwhile, new risks including cyber liability and reputational damage are also interlinked. As social media presence and technological engagement expand, so do the chances of a cyber attack or a damaging PR move.
Unfortunately, many companies are still unaware that such risks are not addressed under a traditional general liability policy, pointed out Ty Sagalow, vice president of the Innovation Insurance Group.
“The number of companies that believe cyber is included under a GL is still dramatically high and there’s just very, very little basis to support that proposition,” Sagalow said. “I don’t know if it’s wishful thinking or if brokers need to find more effective ways of communicating the issue.”
Still, Sagalow noted positively that there has been some improvement in this area and that the overall client pool for cyber insurance has grown.
“The number of companies that are purchasing cyber has increased over the last several years,” he said. “It wasn’t that long ago that it was about 7% [who carried coverage] and now you’re seeing numbers around 30%.”
Other risks in the top 10 identified by Allianz include changes in legislation or regulation, market stagnation or decline, intensified competition, information technology failures or espionage, and quality deficiencies or serial defects.
