Climate change and increasing weather volatility has surged into third place in an annual Allianz Global Corporate and Specialty (AGCS) survey of business risks facing the Australian insurance industry.

The climate concerns in the 2020 Allianz Risk Barometer rose from eighth position last year to rate ahead of market developments, business interruption and natural catastrophes. Legislation and regulation changes remains the top risk, while cyber incidents rose one place into second.

AGCS Pacific CEO James Stack says increased concern over climate change is understandable given the unprecedented number of major bushfires in multiple states across the country this summer.

“These fires not only cause physical property damage, but also potential business interruption as the smoke and fire damage leads to hazardous air quality levels and impacts agricultural supply chains,” he said.

“With increased awareness and first-hand experience of the negative impact of climate change, it is no surprise it is considered one of the top three risks for Australian businesses for the first time.”

Claims from bushfires since September have topped $1.4 billion, the Insurance Council of Australia says, while AccuWeather estimates the total damage and economic losses will be $US110 billion ($159 billion).

The Australian results are part of the global Barometer survey which this year incorporated the views of a record 2718 respondents from 102 countries. Participants are asked to name up to three risks they believe to be of most importance.

Globally, cyber incidents topped the rankings for the first time, rising from second place last year and up from 15th place seven years ago.

AGCS says businesses face larger and more expensive data breaches, an increase in ransomware and spoofing incidents, as well as the prospect of privacy-driven fines or litigation after an event.

“Five years ago, a typical ransomware demand would have been in the tens of thousands of dollars. Now they can be in the millions,” Deputy Global Head of Cyber Marek Stanislawski said.

Business interruption has slipped to second place globally, while legislation and regulation changes, natural catastrophes and market developments round out the top five.

Climate change rose to seventh place, its highest-ever position in the global barometer, and was selected by 17% of respondents compared to 13% last year.

Businesses fear physical asset losses from events such as rising seas and fiercer storms and flooding but are also concerned about other impacts.

AGCS CEO Joachim Muller says cyber risk and climate change are two significant challenges that companies will need to watch closely in the new decade, given potential impacts on operational performance, financial results and reputation with key stakeholders.

“Preparing and planning for cyber and climate change risks is both a matter of competitive advantage and business resilience in the era of digitalisation and global warming,” he said.