Physical damage to property is an obvious and devastating result of natural catastrophes and man-made disasters, but the economic impact from business interruption (BI) is often much higher and presents a growing risk, according to Allianz Global Corporate & Specialty (AGCS).

The insurer analysed more than 1800 large BI claims totalling €3 billion ($4.55 billion) between 2010 and last year for a new report.

It found the average large BI property claim is now €2.2 million ($3.33 million), compared with the average large property damage claim of €1.6 million ($2.42 million).

The severity and frequency of BI claims are increasing, with most caused by non-natural hazards such as human error or technical failure.

Fire and explosion is the top cause, accounting for 59% of all BI claims globally.

“The growth in BI claims is fuelled by increasing interdependencies between companies, the global supply chain and lean production processes,” AGCS CEO Chris Fischer Hirs says.

“Whereas in the past a large fire or explosion may have affected only one or two companies, today losses increasingly impact a number of companies and can even threaten whole sectors globally.”

As manufacturing production continues to shift to Asia, so too have large claims. There is an increasing concentration of production sites and logistics hubs in some areas, leaving them vulnerable.

“If such clusters are hit by natural catastrophes, or by other events such as a fire or explosion – as recently happened at the Tianjin port in China – disruptive effects can quickly multiply, resulting in contingent business interruption losses around the globe,” Allianz says.

Non-damage causes of BI could become more relevant in future, the report says.

Cyber attacks, political violence, strikes, pandemics and power outages could cause large losses without damage to property.

“Such losses would only be covered by emerging non-damage BI policies, which only a few companies have purchased to date, but which more and more businesses are becoming interested in.”