Fires and explosions cause largest losses for business globally, Asia Pacific accounts for 17% (EUR10bn) of total value of claims worldwide: Allianz

• Analysis
  of over 470,000 global insurance claims from 2013 to 2018. Largest financial
  losses come from fires/explosions and aviation incidents
• Majority
  of corporate insurance claims originate from technical or human factors, accounting
  for 87% of all claims by value
• Property
  claims are becoming more expensive, with a rising share of business
  interruption losses

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SINGAPORE - Media OutReach - 13 December 2018 - Fire and explosion incidents cause
the largest claims for insurers and the businesses they cover, according to new
research from Allianz Global Corporate & Specialty (AGCS). The vast majority
of corporate insurance claims originate from technical or human factors despite
natural catastrophes such as hurricanes, having caused devastating losses over
the past two years.

 

In its latest Global
Claims Review, AGCS reveals the top causes of claims in the
corporate insurance segment based on an analysis of 470,000 claims from over
200 countries over the past five years (July 2013 to July 2018) with an approximate
value of €58bn (US$66.5bn).

 

The largest financial losses come from fires/explosions,
aviation incidents, faulty workmanship/maintenance incidents and storms, which
collectively account for over 50% of all claims by total value. Over 75% of
financial losses globally arise from 10 major causes of loss.

 

“The report highlights the increasingly high values at risk
for businesses and their insurers alike,” says Philipp Cremer, Global Head of
Claims, AGCS. “In today’s interconnected and globalized business environment, financial
losses are increasing due to geographical concentration of values – often in risk-exposed
areas – and from the knock-on effects of global supply chains and networks. Looking
to the future, new
technologies bring business benefits but also risks and claims.
However, they also provide an opportunity to prevent and mitigate losses and
improve the claims settlement process for our customers.”

 

Exposures increasing
in Asia Pacific

 

Asia Pacific accounts for 17% of total value of claims
globally at almost €10billion, and 6% of total claims by number globally.

 

In particular, financial lines and liability claims in the
region are increasing in size and frequency as regulators step up their
activities, introduce tougher environmental and consumer protection regulation
and with growing public awareness of rights to compensation.

 

“For D&O and professional indemnity insurance across the
region, we see more intense regulatory enforcements in Asia markets that do not
always follow US or European understanding of law. Australia, in particular has
experienced a sharp rise in D&O activity in recent years, caused by more
litigation. Class action lawsuits and more litigation funders have made
Australia one of the most litigious countries outside the US,” says Stephan
Kammertoens, Financial Lines Claims Specialist at AGCS.

 

The frequency of liability claims in Asia has also been
increasing in Asia. “During Q1 2017, AGCS had some 800 pending liability claims
in Asia, which has risen to 1,300 by Q2, 2018,” says Peter Oenning, Liability
Claims Specialist at AGCS. “We are also seeing much larger claims in Asia than previously.
Once 9 out of 10 large claims globally AGCS would have seen would have come
from the US. Now it’s more like 7 in 10, reflecting greater activity in Asia.
As companies have become more global and more Asian companies operate in the
US, the chances of being involved in litigation have increased.”

 

More expensive fires
and aviation repairs

Over the past five years fire and explosion incidents have
caused in excess of €14bn worth of losses and are responsible for more than
half (11) of the 20 largest non-natural catastrophe events analyzed. The
average claim is almost €1.5mn.

 

Fire is the top
cause of loss in China, accounting for 65% of all claims in China by value, due
to large industrial blazes, such as the 2015 Tianjin explosions which severely
disrupted the port and container storage stations and impacted multiple
businesses.

 

“In general, property insurance claims are higher with
inflation and greater concentration in value as a result of globalization and
more integrated supply chains,” explains Raymond Hogendoorn, Property and
Engineering Claims Specialist at AGCS. “As manufacturers have become more
efficient, the values per square meter have risen exponentially. Fire and flood
claims are much more expensive per square meter than a decade ago.”

 

Costs associated with the impact of business interruption (BI)
can significantly add to the final loss total from fire and explosion incidents,
as well as many of the other major causes of loss identified in the report. Almost
all large property insurance claims now include a major BI element: The average
BI property insurance claim now totals €3.1mn,around 39% higher than the
corresponding average direct property loss (€2.2mn).

 

Despite recent record-breaking natural catastrophe loss
activity around the world, storm is the only natural catastrophe event to
appear in the top 10 causes of loss. Analysis shows corporate insurance claims
typically originate from technical or human factors — or non-natural
catastrophe events — accounting for 87% of all claims by value.

 

The global aviation industry recently experienced its safest
year ever but claims activity shows no sign of abating. Aviation
collision/crash incidents — both ground and air — are the second major cause of
losses globally and is the the top cause of loss in Australia accounting for
almost a third of value of claims. Increasing repair costs from composite
materials and more sophisticated higher value engines on aircrafts are also a
factor.

 

Liability trends and
InsurTech improvements

Defective products and faulty workmanship incidents, which
account for 14% of all claims by value, are the top cause of liability losses
for businesses. In Singapore, faulty workmanship incidents are responsible for
almost 60% of the value of corporate insurance losses. Supply chains in
industries like automotive manufacturing are becoming more complex, leading to
larger product recalls and corresponding product liability claims. Measures by
companies to restrict their number of worldwide suppliers further increases
exponentially product liability risks for these few suppliers.

 

It is estimated that around a third of large corporate liability
claims involve litigation with third parties, compared with property insurance
where less than 1% of claims do on average.

 

Analysis also shows that insurers have paid on average €32mn
a day over the past five years to cover losses — AGCS alone paid €4.8bn to its
insureds in 2017. Insurers are increasingly adopting innovative technologies to
improve the claims handling process. Machine learning and robotics can speed up
the claims process for low-value, high-frequency claims. To quickly assess wind
or flood damage following natural catastrophes, AGCS utilizes satellite imagery
and drones, providing faster loss estimates that enable better allocation of
resources and earlier claims payments.

 

The report provides loss break-down statistics for 13 countries
and analyzes claims patterns across various industries such as aviation,
shipping
and energy
as well as insurance lines of businesses such as property,
engineering,
liability
and financial
lines.

Link to Overview
of AGCS Global Claims Review 2018:

Link to PDF
of AGCS Global Claims Review 2018:

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