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AGCS lists top BI claim loss causes

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Australia’s top causes of business interruption (BI) insured losses are fire/explosion and professional indemnity-related claims, such as negligence and misadvice stemming from corporate actions.

Those two categories each made up a fifth of claim values in the past five years, according to Allianz Global Corporate & Specialty (AGCS).

AGCS analysed 3,994 Australian BI claims from the five years to the end of 2021 worth around €1.8 billion ($2.62 billion).

“Although bushfires and the recent floods in Australia make the headlines, fires in factories and other industrial production sites contribute to the largest share of losses,” AGCS Regional Head of Claims, Asia Pacific Volker Ziegs said.

“Against a backdrop of higher property and asset values, as well as the interconnected nature of today’s supply chains, fires can have significant downstream effects on other businesses around the world, resulting in severe interruptions to operations and culminating in higher final loss totals.”

Natural catastrophes took third place at 15%, defective product was fourth at 8%, while damaged goods including handling/storage (the most frequent driver of BI insurance claims) was fifth by value at 6%.

Almost a third of the value of the claims total – which included the share of other insurers in addition to AGCS – fell into a general “other” cause basket.

Globally, the top three causes of loss by value were fire and explosion, natural catastrophes and faulty workmanship/maintenance, AGCS’s worldwide analysis of 534,456 BI claims worth €88.7 billion ($130 billion) found. Almost half of BI claims losses globally were from those three causes.

The other top causes of loss making up the top ten were aviation collision/crash (9%), machinery breakdown (5%), defective product (5%), shipping incidents (3%), damaged goods (3%), negligence/misadvice (2%) and water damage (2%).

"Insurance companies have paid out – on average – over €48 million ($70.3 million) every day for five years to cover losses – outlining the important role the sector has to play in helping businesses manage and mitigate such perils,” the Global Claims Review 2022 said.

It says significant corporate insurance claims of more than 100 million euros such as those arising from fires, aviation crashes or shipping incidents, account for fewer than 1% of claims by number, but for more than a quarter of the total value.

Around 88% of claims were valued at or below €50,000 ($73,234), accounting for just three per cent of total value.

For natural catastrophes losses – 15% of the total value – analysis of more than 20,000 claims around the world showed the top five causes of loss were hurricanes/tornados (29%), storm (19%), flood (14%), frost/ice/snow (9%) and earthquake/ tsunami (6%).

AGCS Chief Claims Officer and Board Member Thomas Sepp says higher property and asset values, more complex supply chains and the growing concentration of exposures in one location are adding to claim costs.

“The future does not look brighter anytime soon,” he said. “The ongoing war in Ukraine, a spike in the cost and frequency of business interruption losses and the sustained elevated level of cyber claims are creating new challenges.

"The impact of soaring inflation around the world will bring further pressure on claims costs.”